Textile Apparels & Clothing in India

The Textile Apparel & Clothing Industry in India Market Research 2009

Market Research on Textile Clothing & Apparels Prepared for

Italian Trade Commission, Trade Promotion Section of the Consulate General of Ital y Mumbai

By

ACE GLOBAL PRIVATE LIMITED NEW DELHI, INDIA

Market Research on Textile Clothing & Apparels Prepared for

Italian Trade Commission, Trade Promotion Section of the Consulate General of Ital y Mumbai

By

ACE GLOBAL PRIVATE LIMITED NEW DELHI, INDIA

Table of Contents 1.

Introducti Introduction.................. on.................................. .............................. .............................. ................................ .............................. .............................. ..................... ..... 1 1.1 Objectives Objectives .............................. .............................................. ................................ .............................. ............................... ................................. ...................... ...... 1 1.2 Coverage Coverage .............................. ............................................ ............................... ................................. ................................ .............................. ........................ .......... 1 1.3 Methodolog Methodology y .............................. ............................................ .............................. ................................ .............................. .............................. ..................... ..... 2 Secondary Research ............................... .............................................. ............................... ................................ .............................. ........................ .......... 2 Primary Survey .............................. .............................................. ................................ ............................... ............................... ................................ .................. 2 1.4 Draft Report Report ............................... ............................................. .............................. ................................ .............................. .............................. ..................... ..... 3

2.

Market Market Characteris Characteristics.................. tics................................ .............................. ................................ .............................. .............................. ..................... ..... 4 2.1 Market Market Size ................................ .............................................. .............................. ................................ .............................. .............................. ..................... ..... 4 2.2 Assessment Assessment of Demand and Market Potential in India .................. ........... .................... ........... ......... 5 2.3 Demand Demand Projection............................ Projection............................................ .............................. .............................. ................................ ............................ ............ 6 2.4 Key Market Drivers – Domestic market................. market........ .................... ........... .................... ........... ................... .................... ............. ... 7 2.5 Market Market Structure Structure and Segmentatio Segmentation n .............................. ............................................ .............................. ................................ .................. 8 2.5.1 Market Segmentati Segmentation on by Price .............................. ............................................. ............................... ................................ .................. 9 2.6 Regional Characteristics of the Market .................... ........... .................. .................... .................... ................... .................... ............ 11

3.

Consumer Behavior and Preferences ........................................................................... 12 3.1 Characteristics of Indian Consumer ........... ..................... ........... ................... ................... .................... ................... .............. ..... 12 3.2 Purchase Pattern of Textile Products.......................................................................... 13 3.3 Preferred Brands........................................................................................................ 14 3.4 Factors that Influence the Choices of Consumers....................................................... 15 3.5 Degree of Elasticity of Demand................................................................................. 16

4.

Production Production in India India .............................. .............................................. .............................. .............................. ................................ .......................... .......... 17 4.1 Evolution of the Industry .................... .......... .................... ................... .................... ........... ..................... ........... ................... ................... ............ 17 4.2 Industry Status........................................................................................................... 17 4.3 Local Production Production ............................... ............................................... .............................. .............................. ................................ .......................... .......... 18 4.4 Growth Trend by Production Category.................................................................. 19 4.5 Key Players Players ................................ .............................................. .............................. ................................ .............................. .............................. ................... ... 23 4.6 Product Product Range Range ............................. .............................................. ................................. .............................. .............................. ............................... ............... 25 4.7 Major Concentration Areas for Production ................................................................ 25 4.8 State of Technology................................................................................................... 27 4.8.1 The Textile and Apparel Supply Chain ............................................................... 27 4.8.2 Apparel Apparel Sector Sector ............................... .............................................. ............................... ................................ .............................. ...................... ........ 30 4.9 Availability of Raw Raw Materials & Semi-processed Semi-processed Fabrics .................. ........ .................... ................... .............. ..... 32 32 Domestic Production of of Raw Material and and Semi-Processed Fabric Fabric ................... .......... ................... ............ 34 34 Import of of Raw Material and Semi-processed Fabrics .......... ..................... ........... ................... ................... ............ 35

5.

Structure of Foreign Trade........................................................................................... 38 5.1 Import Import Scenario Scenario............... ............................... .............................. .............................. ................................ ............................... ............................ ............. 38 5.2 Export Scenario .................................................................................................... 39

6.

Competition................................................................................................................. 43 6.1 Characteristics ...................................................................................................... 43 6.2 Product Range, Brand and Category...................................................................... 43 6.3 Main Competitors - Market Shares........................................................................ 44 6.4 Competition by Segment....................................................................................... 45 6.5 SWOT Analysis.................................................................................................... 46 6.6 Growth Prospects.................................................................................................. 47

7.

Potential for European Companies in India.................................................................. 48 7.1 Volumes and changes in the market for European textile clothing and Apparel ..... 48 7.2 Main European producers present in India ............................................................ 50 7.3 Indian buyers / consumers of European products................................................... 52

8.

Regulatory Framework and Legislations...................................................................... 53 8.1 Sector specific Regulations ................................................................................... 53 8.2 Foreign Direct Investment (FDI) Policy ................................................................ 54 8.3 Business Structure Options ................................................................................... 55 8.4 Practical aspects of doing Business in India .......................................................... 57 8.5 Investing in Existing India Companies .................................................................. 57 8.6 Taxes and Tariffs .................................................................................................. 58 8.7 Protection of Intellectual Property (trademarks, patents, etc.) ................................ 58

9.

Marketing and Distribution Structure........................................................................... 59 9.1 Trade channels...................................................................................................... 59 9.2 Key trends in the Retail sector............................................................................... 61 9.3 Trade Margins and Commercial terms................................................................... 62

10. Opportunities for Italian companies to enter the Indian market ................................. 64 10.1 Positive Experiences / Perceptions about Italian Products .................................. 64 10.2 Increasing trend in Imports from Italy................................................................ 64 Raw Material and Semi-Processed Fabrics .................................................................. 64 Import of Finished Products ........................................................................................ 68 10.3 Demand for Italian products .............................................................................. 69 10.4 Market opportunities ......................................................................................... 69

Market Research on Textile Apparels & C lothing ___________________________________________________________________________________

1. Introduction This research study on Textile Clothing and Apparels sector in India has been commissioned by Italian Trade Commission (Trade Promotion Section of the Consulate General of Italy), Mumbai. Ace Global Private Limited, a consultancy company based in New Delhi, has been appointed to undertake the study.

1.1 Objectives

The main objectives of the market research are to: •

Carry out market analysis of the production and distribution of textiles for clothing and apparels in India, geared to the Italian entrepreneurs interested in the Indian market.

•

Identify potential buyers of products/ operators in India, interested in Italian fashion products.

•

Identify concrete forms of industrial cooperation, both with local firms of equal size (small and micro enterprise) and market bracket (high range) and with suppliers of raw materials (yarn, woven silk, cotton and cashmere).

•

Examine the various aspects of law in commercial matters (procedures for opening a credit line in India, general rules on the procedure of customs clearance of goods, customs duties and other payments, rules of certification).

•

Check the main features of competition and the increasing needs of local consumers.

1.2 Coverage The research covers the following aspects of the sector: •

Market Characteristics

•

Consumer Behaviour and Preferences

•

Production in India

•

Structure of foreign trade

•

Competition

•

Potential for European companies in Indian market

•

Regulatory framework and Legislations

Page 1 Ace Global Private Limited


•

Marketing and Distribution structure

•

Opportunities for Italian companies to enter the Indian market

1.3 Methodology

The methodology followed for the research work constitutes both secondary and primary research. The details of the research work have been provided below: Secondary Research The secondary research has been carried out to obtain the information on: -

Macro-economic scenario of Indian economy

-

Sector specific government policies and regulations including taxes and custom duties

-

Present status, growth trends, and the future outlook for the sector

-

Import-Export data

-

Sector specific details and relevant information

The main sources of the information were: -

Government of India websites related to economy and trade like Ministry of Finance, Department of Commerce, Department of Central Excise and Customs etc.

-

Import and Export data from Directorate General of Commercial Intelligence and Statistics (DGCI&S), Govt. of India.

-

Company Websites

-

Catalogues of Indian manufacturing and marketing companies

Primary Survey Primary survey was conducted to assess the market structure, size, and growth trends of the sector in India. The primary survey was carried out through interviews based on structured questionnaires, with manufacturers, importers, retailers raw material/semi-finished goods suppliers, and industry bodies in Delhi/NCR, Ludhiana, Coimbatore/Tirupur, Chennai, Mumbai and Ahmedabad.

A list of organizations covered through the primary survey is annexed. It is pertinent to highlight here that although most of the respondents were cooperative, some companies did not agree to



meet the consultants while some shared only part of the information. In such cases, effort has been made to compile as much information as possible from se condary sources.

1.4 Draft Report This Draft Report has been prepared based on the compilation and analysis of all information/data collected through secondary and primary research.



2. Market Characteristics India’s textile clothing and apparels sector has opened up significantly with the dismantling of quotas. Global apparel market is gradually shifting from western countries to Asia on account of cost competitiveness. India has also the added advantage of low labor cost along with other countries like Bangladesh, Indonesia and China.

2.1 Market Size

Apparel is the second largest retail category in India. There are a number of factors that have contributed to a definite swell in apparel market size. The rising affluence of the middle class due to rising disposable income and strong per capita income have considerably helped the industry to move ahead from a commodity level garment purchasing to a life style or a branded level product. India’s domestic market for clothing is currently worth Euro 20,219 million in 2008. It has registered a steady compounded annual growth rate (CAGR) of 13.6% in the past 5 years. Volume wise, apparel market has grown from 4.8 billion units in 2004 to 5.9 billion units in 2008 at a CAGR of 5.3%. India's Apparel Market Size Category

2004

2005

2006

2008

2007

(estimates) Volume

Value

Volume Value

olume Value

Volume Value

Volume Value

(million

(Euro

(million (Euro

(million (Euro

(million (Euro

(million (Euro

units)

Million) units)

Million) units)

Million) units)

Million) units)

Million)

Menswear

1,328

4,450

1,379

4,975

1,443

5,605

1,516

6,381

1,600

6,938

Women’s

1,368

3,856

1,443

4,433

1,523

5,106

1,609

5,923

1,676

6,414

466

1,014

486

1,152

19

1,461

548

1,695

579

1,816

Kids’ wear

1,222

1,836

1,269

2,045

1,323

2,333

1,381

2,702

1,468

2,975

Uniforms

423

991

457

1,199

498

1,461

543

1,797

581

2,077

Total

4,807

12,147

5,034

13,803

5,306

15,966

5,597

18,498

5,905

20,219

wear Unisex apparel

CAGR By Volume: 5.3% ; By Value: 13.6% (Conversion Rate: 1 Euro = 64 Indian Rupees)



India's Apparel Market Size: By Volume 7,000 6,000 n o i l l i M n i y t Q

5,000 4,000 3,000 2,000 1,000 0 2004-05

2005-06

2006-07

2007-08

2008-09 (estimates)

Year M ens w ear

Wom en sw e ar

Unis ex appar el

Kidsw ear

Uniforms

Total

India's Apparel Market Size: By Value 25,000 n o i l l i M o r u E n i e u l a V

20,000 15,000 10,000 5,000 0 2004-05

2006-07

2008-09 (estimates)

M ens w ear

Year Wom ens w ear

Unis ex appar el

Kidsw ear

Uniforms

Total

2.2 Assessment of Demand and Market Potential in India

Indian textile clothing and apparel industry has been one of the worst affected under the impact of financial meltdown that has impacted the economies of US and EU. As a fall- out, India’s domestic textile and apparels market suffered some set-back. However, India’s economy during the past 2/ 3 months has shown signs of recovery. Government of India has projected GDP growth rate of 6.5% for 2009-10. This is much better economic situation when one compares with the developed western countries.



Future Outlook for Clothing and Apparels sector Apparel, is the second largest retail category in India. Retail boom in India continues to stimulate consumer demand for apparels and is estimated to grow at the rate of 12-15 per cent annually in terms of growth in rupee value. In fact, reflecting the huge opportunity in this segment, AT Kearney's 'Retail Apparel Index' ranks India as the third most attractive market for apparel retailers. According to the Confederation of Indian Industry–Ernst & Young Textiles and Apparel Report 2007, the Indian sourcing market is estimated to grow at an annual average rate of 12 per cent from an expected market size of US$ 22 billion-25 billion in 2008 to US$ 35 billion-37 billion by 2011. More international brands have started queuing up to source from India, through vendors or whollyowned units. German kids wear brand Kanz, Ireland's biggest linen manufacturer Baird McNutt, and Finnish textile major Ahlstrom are buying into the India garment story. Consumer spending on apparel in India has grown over the last five years, touching the global benchmark of 5 per cent of the total income, according to Consultancy firm MCKinsey. Growth in consumer spending has been sustained on the strength of macro-economic fundamentals, Economic recession has, however, indirectly helped India to retain some of its exports in the EU and US market. The latest import data from both the countries seem to substantiate the fact. In the wake of depression, US which was earlier sourcing from Mexico and Central and Latin America is moving to Asian countries particularly from China and also India and other countries. EU which was concentrating mainly from other EU countries has also taken the same strategy of moving towards Asian region.

2.3 Demand Projection The domestic demand is projected to go up at a CAGR of 10.5% by value over the next 3 years. In volume terms the growth rate is expected to be 5% per year in the next three years. Demand Projection Apparel Market: By Volume

7,000

6,835

6,800 n o i l l i m n i y t Q

6,510

6,600 6,400

6,200

6,200 6,000

5,905

5,800 5,600 5,400 2008-09 (Base Year)

2009-10

2011-12

CAGR: 5% Year


2010-11


Demand Projection Apparel Market: By Value

30,000 ) n o i l l i M o r u E ( e u l a V

25,000

24,688 20,219

27,280

22,342

20,000 15,000 10,000 5,000 0 2008-09 (Base Year)

2009-10

2010-11

2011-12

CAGR : 10.5% Year

2.4 Key Market Drivers – Domestic market

Changing demographic profile works as a major stimulus to market development. India has a young consumer profile with over 65% of the population below 35% years of age. The composition of the Indian population is shifting more towards the age–group 20-49, viz, the working population with purchasing power. It seems to indicate that consumer life style and preferences are changing fast which is a prominent driving factor. Rising Income Level A large number of households are getting added to the consuming class with growing income levels. This has been a significant rise in high income group households from 5.5 million in 1995 to 18 million households in 2005 and from 18 million households to 31 million households for high middle income group. There has also been increase in the nuclear family structure, a growing number of educated and employed women, media proliferation and growing consumerism, have all contributed to the growth of organized retailing. There is increase in awareness of the tier II cities and this is eroding the difference between the metros and the tier II cities in terms of urban aspirations. Retail Space Quality retail space has been one of the key hurdles for the development of organized retail. In 2007 there were 375 shopping centers / malls covering 90 million sq.ft quality retail space. Even though this still constitutes a small fraction of total retail in India, this growth in quality retail space is expected to impact the growth in the apparel market as there will be considerable change in the shopping habits. Impulse shopping is expected to go up up to 40% of total mall shopping. Awareness and sensitivity of brands will also be heightened.



Mall Culture The emergence of mall culture and rapid development of malls would act as a catalyst in this retail growth story. Drivers of Exports •

Rising outsourcing budgets of retail giants

•

Indian companies evolving from mere converters to vendor partners of global buyers

•

Large outsourcing orders helping Indian companies build capacities, lower their per unit cost and become more competitive

2.5 Market Structure and Segmentation

Indian apparel market is vast, and fragmented and yet growing, characterized by presence of large number of players, widely dispersed across the country. The market is segmented in three different ways: -

Segmentation by User category

-

Segmentation by Use

-

Segmentation by Price

Market Segmentation: User Category

Men’s wear

Women’s wear

Unisex

Kids’ wear

Market Segmentation – by USE

Formal Wear


Casual Wear

Active Sportswe

Traditional Wear

Uniforms


The market, well dispersed and fragmented on considerations of quality and price may be classified under three broad categories. •

The low end market: Lower and economy (marginally improved product segment in relation to the lower category), solely volume driven, products are mostly unbranded and dominated by large number of manufacturers. The manufacturers operating in these segments are beset with problems of high competition, limited capacities, inadequate logistics and paucity of funds. Essentially the manufacturers are regional or even local players.

•

The mid-range market: This segment features medium range of products, though primarily volume driven, caters to diverse sections of Indian consumers across all regions, Its quality is by and large acceptable to all sections. Majority of manufacturers, large and medium, have products on offer for these categories of consumers.

•

The high end market: MNCs and large Indian players operate in the premium and superpremium product categories. Exclusivity in product features such as high quality raw materials, embellishments, design developments and above all branding of products for years make the products very special. Elitist categories of consumers pay for the products on demand.

2.5.1 Market Segmentation by Price MENSWEAR

WOMEN’S WEAR

UNISEX APPAREL

Product

Average Price

Product

Average Price

Product

Average Price

Category

(EURO/ Piece)

Category

(EURO/ Piece)

Category

(EURO/ Piece)

Entry Level Shirts Super

Entry Level Ethnic wear

28 and above

Premium

Super

Entry Level Jeanswear

61+

Premium

Super

57+

Premium

Premium

18 – 27+

Premium

34 – 60+

Premium

26 – 56+

Medium

12 – 17+

Medium

17 – 33+

Medium

14 – 25+

Economy

7 – 11+

Economy

9 – 16+

Economy

7 – 13+

Low

4 – 8+

Low

Low

5+

Trousers

Sarees

3+

Woolens: Sweaters, Pullovers, Cardigans

Super Premium

36+

Super Premium

116

Super Premium

34+

Premium

25 – 35+

Premium

60 - 115+

Premium

20 – 33+

Medium

16 – 24+

Medium

26 – 59+

Medium

7 – 19+

Economy

8 – 15+

Economy

9 – 25+

Economy

4 – 6+

Low

5 – 7+

Low

2 – 8+

Low

2 – 3+



MENSWEAR

WOMEN’S WEAR

UNISEX APPAREL

Product

Average Price

Product

Average Price

Product

Average Price

Category

(EURO/ Piece) Entry Level

Category


Category


Formal Suits, Jackets,

Petticoats

1+

Blazers*

Casual Blazers, Jackets Including Leather

Super Premium

226+

Premium

137 – 225+

Medium

97 – 136+

Economy

58 – 96+

T-Shirts

Low

25 – 57+

Super

Blouses

1+

14+

Super Premium

73+

Premium

39 – 20+

Medium

21 – 38+

Economy

8 – 20+

Low

3 – 7+

Premium T-Shirts

Premium

9 – 13+

Medium

7 – 8+

Active Sportswear

Super

23+

Economy

3 – 6+

Premium

Super

55+

Premium

Premium

15 – 22+

Low

1 - 2+

Medium

9 – 14+

Economy

4 – 8+

Tops (Woven)

Low

1 – 3+

Super

17+

Premium

23 – 54+

Medium

10 – 22+

Economy

4 – 9+

Low

1 – 3+

Premium Nightwear,

Premium

10 – 16+

Medium

8 – 9+

Socks

Economy

3 -7+

Super Premium

4+

Low

1 – 2+

Premium

2 – 3+

Medium

1 – 2+

Economy

1+

Low

<1

KurtaPyjama Super Premium

31+

Premium

21 – 30+

Medium

14 – 20+

Economy

6 – 13+

Western Suits,

37+

Coats,

Blazers Low

2 – 5+ Trousers, Skirts


13+


MENSWEAR

WOMEN’S WEAR

UNISEX APPAREL

Product

Average Price

Product

Average Price

Product

Average Price

Category


Category


Category


Lungis/ Dhotis

2+

Nightwear

&

Other Men's Apparel Super

29+

Premium Premium

18 – 28+

Medium

9 – 17+

Economy

4 – 8+

Low

2 – 3+

Source: Year Book, 2009 Image Multimedia Pvt. Ltd. and Primary Research

2.6 Regional Characteristics of the Market •

The consumer behavior of a particular region which is economically not so developed is different as compared to developed ones. The consumers in the less developed region are understandably, more price-conscious. Always on the lookout for quality products, their guiding principle is ’value for money’. A lower per capita income, in eastern region for example, compared to western and northern India leads to a lower per capita purchasing power. Additionally, Delhi being centrally located and Mumbai, being the financial capital have certain advantages. The consumers who live in these cities are more exposed to latest apparel collections and are more familiar with design, quality and latest trendy fashion, as well as the luxury of greater choice.

•

The relatively undeveloped region offers several in-built advantages as well. Fashion contenders setting out to do business in these regions find to their advantage that the region has not been exploited commercially and is prone to competition. The market, therefore, offers much but it needs to be cultivated in an organized manner.

•

Local ready availability of products also influences a consumer. The decision to stick to a particular available brand seems to govern the purchase decision than the rarely available choicest product. Logistics, convenience and easy availability are important considerations for a local consumer.

•

Regional considerations, such as climatic conditions etc., play a major role in so far as the purchase decision of apparels is concerned. For instance, a consumer in Northern region would spend more on woolen apparels and clothing than his counterpart in the west or south where the winter is much milder. Similar is the case with linen products. It has not found much acceptance among Indian consumers. Besides being expensive, linen has not become popular in a tropical country like India.

•

There are certain common considerations for consumers regardless of locations. The consumers by and large are becoming increasingly more and more conscious of value of



money. Price sensitivity is a common concern. Purchase decisions of consumers anywhere are more guided a combination of demographic and psychometric factors, such as, disposable income, age-distribution, pattern of income distribution, quality of upbringing, aptitude, tastes and preferences and so on.

3. Consumer Behavior and Preferences

3.1 Characteristics of Indian Consumer

The Indian consumers are noted for the high degree of value orientation. Such orientation to value has labeled Indians as one of the most discerning consumers in the world. Even, luxury brands have to design a unique pricing strategy in order to get a foothold in the Indian market. Indian consumers have a high degree of family orientation. This orientation in fact, extends to the extended family and friends as well. Brands with identities that support family values tend to be popular and are accepted easily in the Indian market. Indian consumers are also associated with values of nurturing, care and affection. These values are far more dominant than values of ambition and achievement. Products, which communicate feelings and emotions gel with the Indian consumers. Different Segments of Indian Consumers Socialites: Socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. They are always looking for something different. They are the darlings of exclusive establishments. They go for high value, exclusive products. Socialites are also very brand conscious and would go only for the best known in the market. The Conservatives: The Conservatives belong to the middle class. The conservative segment is the reflection of the true Indian culture. They are traditional in their outlook, cautious in their approach towards purchases; spend more time with family than in partying and focus more on savings than spending. Slow in decision making, they seek a lot of information before making any purchase. They look for durability and functionality but at the same time is also image conscious. They prefer high value consumer products, but often have to settle for the more affordable one. These habits in turn affect their purchasing habits where they are trying to go for the middle and upper middle level priced products. The Working Women: The working women’s segment is the one, which has seen a tremendous growth in the late nineties. This segment has opened the floodgates for the Indian retailers. The



Indian women have grown out of their long-standing image of being homemakers. Working women have their own mind in decision to purchase the products that appeal to them. The Rich: India has over 1 million rich households (income greater than Euro 8,000 per annum). These people are upwardly mobile. Some of them in this category are Double Income No Kids (DINK) households.

They spend more on leisure and entertainment-activities than on future looking

investments. Indian consumers are also associated with values of nurturing, care and affection. These values are far more dominant that values of ambition and achievement. Product which communicate feelings and emotions gel with the Indian consumers. Apart from psychology and economics, the role of history and tradition in shaping the Indian consumer behavior is quite unique.

3.2 Purchase Pattern of Textile Products

Salient Features of a Consumer Survey on “Purchase Pattern of Textiles” by Textile Committee, Govt. of India, are summarized below: •

In India man-made fabric among various textile materials sells the most.

•

Sales of cotton come next in the order, while wool and silk constitute negligible percentage of total sales.

•

Central, northern and western regions are the major consumers of man-made fabrics.

•

Maximum consumption of cotton is reported from the eastern region.

•

Consumption of cotton in other regions is reportedly much less. This is an interesting revelation since India is ranked third as a cotton producing country in the world.

The relevant findings of the consumer purchase behavior of textiles based on a survey conducted by Textile Committee, Government of India are presented in the following tables:

Region Wise Purchase of Textiles (2006-07) – by value

982

1000

800 n o i l l i B . s R

600 444 400 293 200

0

230 163 106

85 16

18

North Page 13 Ace Global Private Limited

44 5 South

202

163

18 13

68 7 4

East

West Region

22 3 3

94

Central

87

43

Total


Purchase of Textile Clothing and Garments Volume (million metres)

Value (Euro Million)

Urban

Rural

Total

Urban

Rural

Total

2006-07

8,467

15,563

24,030

11.56

12.75

24.31

Cotton

3,703

5,586

9,289

3.77

3.16

6.94

Silk

113

41

154

0.99

0.37

1.36

Wool

46

47

93

0.42

0.25

0.67

3-year CAGR

4.4%

4.8%

4.7%

7.0%

6.0%

6.5%

Cotton

3.3%

3.8%

3.6%

5.0%

1.2%

3.2%

Silk

3.8%

3.5%

3.7%

8.6%

13.4%

9.9%

Wool

-6.3%

-2.7%

-4.6%

1.4%

-2.2%

0.0%

Manmade/ blended

5.4%

5.5%

5.5%

8.5%

8.0%

8.2%

3.3 Preferred Brands

Preference for particular apparel brands depends on individual tastes and preferences and consumers are a divided lot. However, majority of Indian consumers look for certain common parameters like design, quality and above all merchandizing. Innovation in product design and fabric selection, are essential elements that add to value perception for a product. Sales discounts also tend to influence the purchase decisions of consumers provided the minimum parameters/ features are not compromised with. Preferred Brands for Men’s products Name of the Manufacturer Silver Spark Apparel Ltd, Owned by Raymonds India Ltd Raymonds India Ltd Raymonds India Ltd

Brand Park Avenue

Formal / Casual Formal

Remark High-end Segment

Parx Monzoni

High – end Segment High-end Segment

Raymonds India Ltd

Color Plus

Smart Casuals Luxury Life style Brand Casual Wear

Raymonds India Ltd

Notting Hill

Formal & Casual Wear


Medium & High –end Segment Medium Priced Segment


Raymonds India Ltd Aditya Birla Novo Ltd Aditya Birla Novo Ltd Aditya Birla Novo Ltd DCM Benetton India Ltd

Flying Machine Louis Philippe Van Heusen Allen Solly Benetton , Italy

Formal

Celebrity Fashions Ltd

India Terrain

Formal

S Kumar Nationwide Ltd

S Kumars, Reid & Taylor & Tamarind Levi Strauss Blackberry Cantabile

Formal & Casual

Levi Strauss (India) Ltd Blackberrys Cantabiles Retail India Pvt Ltd

Formal Formal & Casual Formal & Casual

Formal Formal Formal & Casual

Medium and High Priced Segment High-end Segment High-end Segment High-end Segment Medium Priced Segment Medium Priced Segment High –end Segment High-end Segment Medium & High-end Segment

Preferred Brands for Women’s products Name of the Manufacturer Raymonds India Ltd Raymonds Ltd

Brand Color Plus Women Park Avenue Women

Formal / Casual Smart Casual Clothing Premium Business Wear for Women, for Working Women Professionals Formal & Casual Wear

Remark High- end Segment High – end Segment

Aditya Birla Nuvo Ltd

Van Heusen


Allen Solly

Formal & Casual Wear Formal & Casual Wear

Medium & High –end


Espirit

DCM Benetton India Ltd

Benetton

Casual,Fun-wear, Frocks, Dungarees, Skirts

High-end Segment

Mango

Mango

Formal & Casual

High-end Segment

Lee Cooper Ltd

LeeCooper

Formal

High-end Segment

Levi Strauss (India) Ltd

Levi Strauss

Formal

High-end Segment

Murjani Group

FCUK, Calvin Klein, Tmooy Hilfiger

Premium casual wear

High-end segment

3.4 Factors that Influence the Choices of Consumers


Medium & High-end Segment

High-end Segment


The consumers put major emphasis on product quality. Price is another important consideration attracting customers to a particular shop/brand/product. Pre and post sales services, parking facilities and ambience of the store or mall are the other major factors that attract local customers.

In the selection of products, the consumers do not give automatic precedence to local brands over national or foreign brands. Value for money has become the over-riding consideration. Fabric, texture and color followed by proper fits and sizing weigh more importance to the local consumers rather than just easy availability of local brands on account of proximity. Local consumers of apparels in each region are also guided by: -

Window POS Displays

-

Roadside Hoardings

-

Gift Vouchers

-

Fresh arrivals

-

Event Sponsorships

-

Discount Offers

-

Celebrity Endorsements

-

Advertisements / Features in Magazines

-

Advertisements on TV/ Electronic Media

3.5 Degree of Elasticity of Demand

Considering that price elasticity depends to a large extent on the extent of competition among the manufacturers, the Lower and Economy segments of the market are usually price-inelastic. These segments being highly competitive do not allow the manufacturers any leverage to increase the price. Higher up along the value chain, the affordability or paying capacity of the consumer is higher. The product market which characterizes mid-product segment becomes increasingly quality oriented and more diversified. Despite competitive pressure, the price in this segment keeps on rising. The demand for the product becomes price elastic. In case of premium and super-premium product segments, where entire focus is on quality, style and brand value, the consumer is insensitive to change in p rice. As per the findings of retailer survey, even an increase of 5% in the price has an effect on low end / economy category products, while mid-end category is usually able to absorb a 5-10% price increase without a major adverse impact on the sales of a brand.



4. Production in India 4.1 Evolution of the Industry

A significantly large section of Indian consumers were traditionally dependent on tailor–made dresses till the late 1980s. Even when over the past few decades western dresses started making inroads in to Indian households both in the urban and rural areas. Indian consumers used to purchase their fabric and hand over to the tailors for stitching. Tailor–made garments had a long era in India. However, increasing availability of ready-made products in retail outlets in metros and other cities, together with media exposure largely worked towards proliferation of ready-made garments in India. Convenience, availability of wide choice of designs, colors and instant availability of products within budget were the factors that tilted Indian consumers towards ‘ready-to-wear products. Evolution of Ready-to- wear Market in India Phase

Period

Description

Phase-I

Pre 1990’s

Era of Tailor Made Garments

Phase-II

1990-95

Ready to wear Inducted

Phase-III

1995-2000

Brands Flourished

Phase-IV

2000-2004

Retail Dominates

Phase-V

2005 onwards

Categories Rule

Source: Images India

4.2 Industry Status The Indian garment industry is highly labor- intensive with about 77,000 units spread over the entire country.

The industry has two major sectors - knitted and woven. Weaving sector is predominantly

small scale, having an average 4-5 power looms per unit. Knits have been more successful especially in export channels. The hosiery sector, on the other hand, has largely a domestic focus and is growing rapidly. The average size of a manufacturing unit does not exceed 15 to 20 machines. The representation of large scale units in the industry as yet is not so significant, though the number of large scale players is slowly rising in tune with the growth trend of the industry. Many International players have also tied up with premier Indian companies. Production Strategy



Three types of production strategies are normally used by apparel manufacturers. The first one is called flexible manufacturing strategy. The manufacturing firm will operate with the flexibility needed to meet the demands of its consumers depending upon the inherent ability to adapt immediate changes in the apparel market. The second method, known as ‘Value added Manufacturing Strategy is a quick response strategy that focuses on eliminating any unnecessary operations. The manufacturers take necessary action through cutting down extra time that delay production such as inspection, bundling, sorting etc requires extra time. ‘Agile Manufacturing Strategy’- the third strategy points to the dynamic ability of the firm to strategically use changes as a vehicle to grow in the new markets. It requires openness to change and flexibility to pursue change - ability to anticipate consumer needs through innovation that makes it possible for the product to grow. Product Categories Indian manufacturers are now fully geared to meet diverse requirements of Indian garments. Broad product categories consist of: •

Men’s wear

•

Women’s wear

•

Children’s wear

•

Unisex wear

Growth of nuclear families and changing demographic structure, have been the main factors for creating separate demand for children garments. Children’s products at present account for about 5 to 8% of total production. This report does not classify’ children’ as a distinct category as it forms part of either men’s or women’s wear. A section of modern Indian society does not discriminate in the upbringing of male and female child. With equality in the level of upbringing, a large section of women use male uniforms. This trend is more pronoinced with women professionals who increasingly use ‘male’ outfits such as trousers, shirts, jackets etc. This has created a unique opportunity for Indian manufacturers to create a separate segment that suits the requirements of both the genders. The demand for unisex clothing is continually on the rise in India. As part of office culture back at home in Japan, Suzuki introduced office/factory uniform for its employees at the Indian joint venture. Since then a large number of Indian companies have introduced uniform culture at offices and factories. Only a few garment manufacturers are producing office uniform. In view of the massive demand arising from Indian employers, market demand for office uniform wear has escalated strongly in recent years.

4.3 Local Production Share by Product Category

-

The pattern of production of garment industry is weighted in favor of ladies garments. This is only to be expected since these garments lend themselves to all kinds of fashion and embellishments.



-

Men’s wear production lags behind women’s wear in terms of share of production by volume. However, by the yardstick of value, men account for higher share in production.

Market Share of Production: By Volume (2007-08)

Market Share of Production: By Value (2007-08)

4.4

Growth Trend by Production Category

Volume wise, apparel production has been growing at a CAGR of little more than 5% in the past 3 years (Menswear 5.3%; Women’s wear 5%; Unisex Apparel 5.5%). However, in Value terms, apparel production has been growing at an impressive CAGR of 11.5 % to 12% in the last 3 years (Menswear 11.4%; Women’s wear 12.1%; Unisex Apparel 11.5%).



Production Trend: By Volume (million units)

Production Trend: By Value (million Euros)

Production Trend by products Within Each Category Production Trend: By Volume Category

MENSWEAR Shirts Trousers Formal Suits, Jackets, Blazers T-Shirts Nightwear, Kurta-Pyjama Innerwear Page 20 Ace Global Private Limited

Volume (Units in '000) 2006-07 2007-08 2008-09 (estimates)

CAGR (%)

345,865 206,010 14,700 89,754 83,630 444,580

4.7% 4.2% 6.1% 4.5% 3.9% 7.4%

360,300 214,100 15,501 94,000 86,150 479,100

379,680 224,000 16,550 98,000 90,320 512,570


Shawls, Stoles, Wrap-ons Lungis/ Dhotis & Other Men's Apparel Total Menswear

14,775 243,400 1,442,714

15,660 250,700 1,515,511

16,130 263,100 1,600,350

4.5% 4.0% 5.3%

Ethnic wear

182,240

192,050

205,301

6.1%

Sarees

361,420

370,100

383,389

3.0%

Petticoats

105,000

108,100

109200

2.0%

Blouses

219,900

233,000

235500

3.5%

T-Shirts

20,180

21,750

23,651

8.3%

Tops (Woven)

16,160

17,289

18,200

6.1%

Western Suits, Coats, Blazers

800

910

990

11.2%

Trousers, Skirts

13,120

14,900

16,250

11.3%

Nightwear

105,070

110,100

114,000

4.2%

Lingerie

469,700

509,800

537,300

7.0%

Shawls, Stoles, Wrap-Ons

29,400

31,460

32720

5.5%

1,522,990

1,609,459

1,676,501

5.0%

Jeanswear

51,570

58,200

63,500

11.0%

Woolens: Sweaters, Pullovers, Cardigans

153,000

157,000

163,100

3.2%


19,100

19,900

20,879

4.5%

Active Sportswear

17,500

20,500

21,300

10.3%

Socks

250,900

264,200

280,500

5.7%

Ties/ Scarves

27,180

28,250

29,250

3.7%

519,250

548,050

578,529

5.5%

WOMEN’S WEAR

Total WOMENSWEAR UNISEX APPAREL

Total UNISEX APPAREL

Production Trend: By Value Category

MENSWEAR Shirts Trousers Formal Suits, Jackets, Blazers T-Shirts Nightwear, Kurta-Pyjama Innerwear Innerwear Shawls, Stoles, Wrapons Lungis/ Dhotis & Other Men's Apparel Total Menswear

Value (Euro Million) 2006-07 2007-08

2008-09 (estimates)

CAGR (%)

2110.94 1473.44 504.53 388.28 252.34

2416.41 1673.28 570.16 446.88 282.19

2644.22 1808.44 626.56 477.50 303.75

11.9% 10.8% 11.4% 10.9% 9.7%

400.78 56.25 418.75 5605.31

475.94 64.53 452.34 6381.72

517.97 72.03 485.94 6936.41

13.7% 13.2% 7.7% 11.2%

1229.69

1432.97

1564.22

12.8%

WOMEN’S WEAR Ethnic wear Page 21 Ace Global Private Limited


Sarees

2079.69

2355.16

2537.81

10.5%

Petticoats

126.56

136.72

142.03

6.0%

Blouses

270.31

303.91

316.41

8.2%

T-Shirts

51.41

58.91

64.06

11.6%

Tops (Woven)

52.19

60.31

65.47

12.0%

Western Suits, Coats, Blazers

29.69

39.84

45.31

23.5%

Trousers, Skirts

175.00

226.56

260.47

22.0%

Nightwear

239.69

270.47

288.44

9.7%

Lingerie

730.47

896.56

968.13

15.1%

Shawls, Stoles, Wrap-Ons

121.09

142.34

162.50

15.8%

Total WOMEN’S WEAR

5105.78

5923.75

6414.84

12.1%

Jeanswear

406.88

481.25

515.31

12.5%

Woollens: Sweaters, Pullovers, Cardigans

510.00

561.09

587.81

7.4%


206.41

237.19

256.72

11.5%

Active Sportswear

112.34

155.63

175.16

24.9%

Socks

166.88

194.53

209.38

12.0%

Ties/ Scarves

58.28

67.97

71.88

11.1%

Total UNISEX APPAREL

1460.78

1697.66

1816.25

11.5%

UNISEX APPAREL

Production Trend by Price Segments MENSWEAR Category

Figure in percentage 2006-07

2007-08

2008-09 (estimates)

Super Premium

1%

1%

1%

Premium

6%

6%

6%

Medium

11%

12%

12%

Economy

27%

27%

28%

Low

49%

48%

47%

Total

100%

100%

100%

WOMEN’S WEAR Category

Super Premium



2007-08

2008-09 (estimates)

0.3%

0.3%

0.3%


Premium

2%

2%

2%

Medium

14%

15%

14%

Economy

33%

34%

34%

Low

51%

49%

49%

Total

100%

100%

100%

UNISEXWEAR Category


2007-08

2008-09 (estimates)

Super Premium

0.5%

0.5%

0.5%

Premium

4%

4%

4%

Medium

15%

15%

15%

Economy

30%

30%

31%

Low

51%

50%

49%

Total

100%

100%

100%

Detailed tables are attached as Annexure, giving breakdown under each category by price segment.

4.5 Key Players The key players of the industry have been listed below on the basis of the following criteria: •

Comparative evaluation of brand equity of the company

•

Marketing reach of the companies in terms of retail outlets across the country and retail outlets by city.

•

Image and reputation of the company.

Name of The Manufacturer

Products Manufactured

Raymond Ltd.

Garments: worsted, woolen and linen fabrics to creating

Mumbai

suits, trousers and apparel. Monzoni: super premium formalwear and sportswear including suits, shirts, trousers and high quality accessories such as handcrafted silk ties, pure leather shoes crafted in Europe and leather belts. Park Avenue: The shirts, trousers, suits and jackets need little care and therefore convenient to carry while travelling.



Name of The Manufacturer

Products Manufactured ColorPlus: one of India's leading casual wear brands. Our shirts, trousers, knits, survival gear and accessories have always met international quality standards. Parx: premium casual lifestyle brand which is positioned to cater to the needs of consumers who are looking for dressing up for life "beyond work". Zapp: range of apparel, accessories and lifestyle products for kids between the age group of 4 to 14 years. Notting Hill: suits, shirts, trousers, jeans, t-shirts and also accessories like ties, handkerchiefs and socks.

Arvind Limited

Flying Machine, New Prot & Ruf & Tuf: Jeans

Ahmedabad

Excalibur : Shirts Arrow : Formals & Casuals Lee : Jeans Wrangler : Jeans Tommy Hillfiger : High Fashion Products

Aditya Birla Nuvo Ltd.

Louis Philippe / Upper Crest: Silk Trousers, Blazer, Ties, T-

Mumbai

shirts Van Heusen: Winter wear, Knits Allen Solly: Formal Trousers and Shirts and Casuals Peter England: Formal shirts and formal and casual trousers for men Espirit: T-shirts and Shirts

DCM Benetton India Ltd Benetton India Private Limited

Benetton Kids: Sweaters, Pullovers, Corduroy Jackers, Denim Wear

Gurgaon

Girls wear: Casual, fun wear, frocks, dungarees, skirts

S Kumar Nationwide Ltd.

S. Kumars, Reid & Taylor, Tamarind

Mumbai

Suits, Polo style shirts, Khaki Trouser, Navy Blazer, Silk Ties, Jeans, T Shirts

Levi Strauss (India) Ltd

Jeans for men and women

Bangalore Lee Cooper

Men’s:

Lee Cooper India Pvt. Ltd. Mumbai

Jeans, T-Shirts, Other Tops, Headgear & Belts Women’s: Jeans, Shirts & Tees, Other Tops, Other Bottoms, Belts & Accessories

CELEBRITY FASHIONS LTD. Chennai

Men’s wear

Profiles of key Market Players are annexed. Page 24 Ace Global Private Limited


4.6 Product Range

Indian apparel industry manufactures wide range of products, woven and knit, formal and casual, to cater to the diverse requirements of customers based on their economic status. Category

Type of Garments

Men’s wear

Shirt, Trouser, Formal Suit, Jacket, Blazer, T-shirt, Night wear, Pajama, Innerwear, Lungi, Dhoti etc.

Women’s wear

Ethnic wear, Sari, Petticoat, Blouse, T-shirt, Top (Woven), Western Suit, Coat, Blazer, Trouser, Shirt, Shirt, Nightwear, Lingerie, Shawl, Stole, Wrapper etc.

Unisex Apparel

Jeans wear, Woolen, Sweater, Pullover, Cardigan, Casual Blazer, Jacket including leather, Active Sportswear, Sock, Tie, Scarves etc

Work -wear

Office designated trouser, shirt or women’s wear, Ladies lab coat, Apron etc

4.7 Major Concentration Areas for Production Indian garment manufacturing is conducted mainly in clusters all around the country. Textile cluster development in the form of textile parks is one of major Government policy to boost garment production. The Government provides clusters various technological and financial assistance with a view to increase competitive edge of Indian products.



Ludhiana

Kanpur

Kolkata

Mumbai

Solapur

Bangalore

Erode

Tirupur



4.8 State of Technology 4.8.1 The Textile and Apparel Supply Chain

The Textile and Apparel Supply Chain comprises of diverse raw material sectors, ginning facilities, spinning and extrusion processes, processing sector, weaving and knitting factories and garment manufacturing. Structure of the Cotton Textile Industry



The Indian textile and apparel industry exhibit varying levels of technology ranging from traditional to most modern and this has impacted the overall growth and productivity of the sector. Spinning Sector Indian spinning sector is perhaps most competitive globally in terms of variety, unit prices and production quantity. Though cotton is the fiber of preference the world over, man-made fiber (polyester fiber and polyester filament yarn) is also produced by large and medium size producers. Spinning sector is technology intensive and productivity is affected by the quality of cotton and the cleaning process used during ginning. Weaving Sector



Weaving sector is predominantly small scale, has on an average 4.5 power looms per unit, suffers from outdated technology, and incurs high co-ordination costs. Knits have been more successful in export sector. The handloom sector (including khadi, silk and some wool) serves the low and the high ends of the value chain – both mass consumption products for use in rural India as well as niche products for urban & exports markets. Three distinctive technologies are used in the sector – handlooms, power looms and knitting machines. It produces, chiefly, textiles with geographical characterization) and in small batches. Handloom production is mostly rural (employing mostly household weavers) and revolves around master-weavers who provide designs, raw materials and often the looms. Weaving, using power looms has traditionally been done by composite mills that combine it with spinning and processing operations. Over the years, government incentives (especially saris and grey cloth) have facilitated the production based on power loom factories and away from composite mills. The processing sector, i.e., dyeing, finishing and printing activities, is mostly done in the small scale. The largest amongst these comprise operations like dyeing and finishing. The processing sector is mostly small scale.

The largest amongst these involve dyeing operations. The remaining are

independent process houses (or part of composite mills) that use automated, semi-automated large batch or continuous processing.

Production Infrastructure of Indian Textile Industry Financial Year

Units

2001

2004

2005

2006

2007

2008

Textile Mills (Non-SSI)

No.

1,846

1,787

1,789

1,780

1,808

1,773

Spinning mills

No.

1,565

1,564

1,566

1,570

1,608

1,597

Composite mills

No.

281

223

223

210

200

176

Exclusive Weaving Mills (Non-SSI)

No.

203

206

202

204

204

179



Spinning Mills (SSI)

No.

996

1,135

1,161

1,173

1,236

1,219

Powerloom units

Thousands

367

413

426

434

440

470

Spindles (SSI and Non-SSI)

Millions

37.91

37.03

37.47

37.51

39.50

Rotors (SSI and Non-SSI)

Thousands

454

482

500

520

601

Looms (Organized Sector)

Thousands

140

105

103

92

88

Powerlooms

Thousands

1,662

1,837

1,903

1,944

1,990

Handloom

Thousands

3,891

3,891

3,891

3,891

3,891

MMF

Million Kg.

1,081

1,101

1,189

1,191

1,663

1,659

MMF Yam

Million Kg.

1,128

1,228

1,337

1,374

2,053

2,101

spindles

Thousands

598

604

604

604

604

spindles

Thousands

426

437

437

437

437

Raw cotton

Million Kg.

2,380

2,907

4,131

4,148

4,760

5,355

Man-made fibres

Million Kg.

904

953

1,023

968

1,139

1,244

Raw wool

Million Kg.

48.04

48.50

44.60

44.90

45.20

Raw silk

Million Kg.

15.86

15.74

16.50

17.31

18.76

Cotton

Million Kg.

2,267

2,121

2,272

2,521

2,824

2,948

Blended

Million Kg.

893

931

585

588

635

677

MMF

Million Kg.

920

1,118

366

366

355

378

Cotton

msm

19,718

18,040

20,655

23,873

26,238

27,205

Blended

Msm

6,351

6,068

6,032

6,298

6,882

6,888

100% NC

msm

14,164

18,275

17,998

18,637

19,545

21,175

Installed Capacity

Worsted

2,106

(Woolen) Non-worsted (Woolen) Fibres Production

Yarn Production

Fabric Production

NC: non-cotton; msm: million square metres Source: Market Size & Share, CMIE, 2009

4.8.2 Apparel Sector

A recent national study on technological up-gradation needs of Ready-made Garment (RMG) Industry conducted by Garment Manufacturing Technology (GMT) Department of National Institute of Fashion Technology (NIFT) has made certain important observations. The study reveals that in export sector only 21% of manufacturers use modern technology by Indian Standards and another 70% may be classified as somewhere between modern technology and ‘primitive’ technology. No company has overall rating rating of world class technology. technology. However, 17% consider consider themselves to be owning world class plant and machinery.



In apparel manufacturing for domestic sector, the situation situation is not different. The manufacturers tend to overestimate the technology level of their plants. Only 9% factories are characterized characterized as being considered modern by Indian Standards though 33% of manufacturers sincerely believe that they have modern plants. 16 percent owners feel that they have a world class plant but actually none of them, according to the study, have reached that stage. Apart from the quality of fabric, the manufacturing processes in the apparel industry play an important role to achieve achieve the level of quality standards. standards. This is also evident from one one of the studies conducted by the GMT Department at NIFT which is based on a comparative analysis of industry norms in the industrialized countries and Indian Apparel industry. Strategies for Technology Up gradation Indian apparel manufacturers have been engaged in the process of technology up gradation in a gradual manner. The technology up gradation plans for each establishment need to be drawn by individual companies as a part of overall organizational strategies. A piecemeal approach is no solution. Steps involved in developing technology strategy include knowing knowing the present status, status, understanding buyer needs, knowing technological options available and so on. On the basis of current status of technology level in factories and taking in account the views expressed by representatives of international buyers, broad guidelines for the technology mix for different product specialization and price points have been developed by GMT Department, NIFT. Machine mix for sewing, pre-sewing and post-sewing, including software applications have been recommended for factories aiming at low, medium and high price segments of the international market. Buyers may not have specific specific technology requirement in all micro areas but there there might be minimum expectations expectations which a plant plant of today must have to qualify qualify to be a supplier.

These

equipments are termed as `order qualifier'. The equipments which shall further improve improve quality and technology status of the factory but but are not must are termed as `desirable'. Certain machines machines are shown as `optional'. These will be added depe nding on product needs. Quality Requisite quality checking must be followed at each stage of manufacturing process in order to maintain the quality. Large Indian undergarment manufacturers in the organized sector conform to BIS specifications for manufacture, raw material usage usage and accessories. Polluting dyes are banned Foreign collaborations Lucrative and burgeoning growth of Indian apparel industry has attracted many international players. Foreign players have been attracted to Indian market for two major considerations. First, the market size is one the largest in the world. The consuming class in the premium and superpremium segment is rising significantly over the years and this has become major focus of interest for foreign players. Secondly, another major purpose of foreign players is ‘use of India’ as a major launching pad for maximizing third country exports. Page 31 Ace Global Private Limited


Major Foreign Collaborations in Indian Apparel Industry Name of Indian Company

Foreign Manufacturer

Nature & Area of Collaboration

Trent Ltd, Tata Group

Industria deDiseno Textil Sociedad Anonima (Inditex

JV to promote Zara Stores in India

SA), Spain Arvind Mills Ltd

VF Corporation Lee, Wrangler,

JV

Vanity Fair, Nautica, JanSports and Kipling Arvind Mills Ltd

CF ITALIA, Italy

Technical Collaboration

Raymond India Ltd

Gruppo Zambaiti, Italy

JV

Raymond India Ltd

Lanificio Fedora, Italy

JV

Raymond India Ltd

UCO NV, Belgium

JV

Madura Garments Ltd, Group

Espirit Global Ltd, USA

JV

Benetton International, The

JV for development of knits

Company of Aditya Birla Novo Ltd DCM Benetton India Ltd

Netherlands

Future Group

Lee Cooper Ltd,

JV

Fabindia

East, UK

JV to include women’s wear (retailing skirts, trousers, dresses and tops)

Reliance

Wrangler, John Player & Lee

Strategic Strategic Partnership

Recent International Entries International Brands

Indian partner

Diesel

Reliance

Holland and Sherry

Digjam

Giorgio Armani, D&G, Salvatore Ferragamo, Boggi, Piquardo, Emporio Armani

DLF

Internacionale

SKNL

Zara and Topshop

Trent (Tata group)

Carter's

Planet Retail

4.9 Availability of Raw Materials & Semi-processed Fabrics



The industry consists of several sub-sectors: spinning, weaving, knitting and garmenting. It also uses different raw materials – cotton, Jute, wool, Silk, man-made and synthetic fibers. Currently India is the second largest producer of raw cotton in the world next to China. Production of both cotton and MMF based fabrics have increased at a high rate in recent years because of increased cotton production and availability, higher prices, healthy growth in demand and Government incentives. Composite Mills Composite mills are integrated large scale mills that combine spinning, weaving and sometimes fabric finishing. About 176 composite mills were operating in March,2008 with an installed capacity of 5.63 million spindles. Between 1995 and 2008 the weaving capacity of the composite mills has declined from 111,540 looms to 55,480 looms. The decline has been compensated by increase of power loom in the hosiery sector. Spinning Mills These mills convert cotton or MMF in to yarn to be used for weaving and knitting. India had about 2,816 spinning mills including SSI units. These had an installed capacity of 34.41 million spindles. Weaving and Knitting Mills These mills convert cotton, man-made or blended yarns in to woven or knitted fabrics. This sector consists of about 3.89 million handlooms, 470, 000 units Fabric Finishing Facilities Overall about 2,300 processors are operating in India including about 2100 independent units and 200 units that are integrated with spinning, weaving or knitting units. Fiber & Yarn •

Domestic cotton production has grown at 19% CAGR in the past 4 years. Approximately 62% of India’s production comprises of cotton or cotton blends, with their share increasing during financial year 2005-08, primarily because of higher cotton availability. Domestic cotton production has grown at 19% CAGR in the past 4 years.

•

India has great advantage in Spinning Sector and has a presence in all process of operation and value chain. India is one of the largest exporters of Yarn in international market and contributes around 25% share of the global trade in Cotton Yarn. India is the fifth largest producer of synthetic fibers/yarn. India accounts for 12 per cent of the world's production of textile fibers and yarn. The country has a strong base for man made fiber of cellulose and non-cellulose origin. Production of polyester staple fiber and viscose staple fiber has grown at 9% CAGR and 4% CAGR respectively during the past 4 years.

•

India is the second largest producer of silk and the only country to produce all four varieties of silk – mulberry, TUSAR, ERI and MUGA. Silk production has grown at 7% CAGR during the past 4 Years.



•

Indigenous wool, production, however, has not grown significantly.

Domestic Production of Raw Material and Semi-Processed Fabric Production (msm) 2004

2005

Growth 2006

2007

2008

2009

2008

3-year

(H1) Cotton

2009 (H1)

18,040

20,655

23,873

26,238

27,205

13,371

3.7%

9.6%

-1.3%

•

Mills

969

1,072

1,192

1,305

1,249

626

-4.3%

5.2%

0.5%

•

Handloom

4,519

4,792

5,236

5,717

6,076

2,894

6.3%

8.2%

-3.8%

•

Powerloom

6,370

7,361

8,821

9,647

9,932

4,717

3.0%

10.5%

-5.2%

•

Hosiery

6,182

7,430

8,624

9,569

9,948

5,134

4.0%

10.2%

3.8%

6,068

6,032

8,298

6,882

6,888

3,630

0.1%

4.5%

6.3%

Blended •

Mills

253

243

252

330

422

256

27.9%

20.2%

26.1%

•

Handloom

117

146

145

99

123

46

24.2%

-5.6%

16.4%

•

Powerloom

4,688

4,526

4,632

5,025

4,918

2,636

-2.1%

2.8%

8.7%

•

Hosiery

1,010

1,117

1,269

1,428

1,425

692

-0.2%

8.5%

-5.5%

17,613

17,998

18,637

19,545

21,175

10,102

8.3%

5.6%

-0.5%

100% NC •

Mills

212

211

212

111

110

46

-0.9%

-19.5%

14.8%

•

Handloom

857

784

727

720

748

364

3.9%

-1.6%

-0.8%

•

Powerloom

15,889

16,438

17,173

18,207

19,886

9,469

9.2%

6.6%

-0.6%

•

Hosiery

655

565

525

507

431

223

-15.0%

-8.6%

6.7%

41,721

44,685

48,808

52,665

55,268

27,103

4.9%

7.3%

-0.1%

Total •

Mills

1,434

1,526

1,656

1,746

1,781

928

2.0%

5.3%

5.5%

•

Handloom

5,493

5,722

6,108

6,536

6,947

3,304

6.3%

6.7%

-3.6%

•

Powerloom

26,947

28,325

30,626

32,879

34,736

16,822

5.6%

7.0%

-0.6%

•

Hosiery

7,847

9,112

10,418

11,504

11,804

6,049

2.6%

9.0%

2.8%

Khadi, Wool, Silk

662

693

769

724

763

381

5.4%

3.3%

0.0%

Total

42,383

45,378

49,577

53,389

56,031

27,484

4.9%

7.3%

-0.1%



Share of Different Fibres in Cloth Production 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 6 7 8 9 0 1 2 3 5 6 7 8 9 9 9 9 0 0 0 0 0 4 0 0 0 0 0 9 9 9 9 0 0 0 0 0 0 0 0 1 1 1 1 2 2 2 2 2 2 2 2 2

Cotton

Blended

Non-Cotton

Khadi, wool, silk

Import of Raw Material and Semi-processed Fabrics Total raw material imports into India, including raw wool, silk, cotton along with yarn and fabric for textiles was of worth US $ 2260.52 million in 2007-08. In 2008-09 (April-Dec) it was US $ 1886.63 million. Imports – Raw, Yarn and Fabric (by Value- US$ million) US $ million HS Code

Description

2005-06

2006-07

2007-08

2008-09 (Apr-Dec 2009)

50

Silk- Raw, Yarn and Woven Fabric

398.06

350.20

393.57

286.44

51

Wool- Raw, Yarn and Woven Fabric

265.50

281.86

331.55

242.68

52

Cotton- Raw, Yarn and Woven Fabric

438.09

464.75

545.65

552.98

54

Man-Made Filaments.

457.00

443.95

489.49

404.26

55

Man-Made Staple Fibres

180.66

208.02

260.76

216.78

85.98

88.36

97.79

74.72

Special Woven Fabrics; Tufted Textile 58

Fabrics; Lace; Tapestries; Trimmings; Embroidery



60

Knitted Or Crocheted Fabrics Total

100.43

100.68

141.71

108.77

1925.72

1937.82

2260.52

1886.63

Source: Directorate General of Foreign Trade

The imports are increasing on a year to year basis; bit the rate of growth of imports has increased in the past two years. The average growth rate in this time was about 15%. This growth rate is fuelled by the increased imports of cotton – r aw, yarn and fabric; man-made filaments and staple fibres; and knitted and crocheted fabrics in the given time period. The growth rate of other yarns and fabrics of wool and silk have kind of stagnated in the recent years.

Import of cotton in various forms – raw, yarn and fabric – constitute the largest share in imports (24%), followed by man-made filaments (22%).

Asian countries are the biggest suppliers of raw material and semi-processed fabrics related to textiles sector in India. Their share is as much as 80% of all imports. The major Asian countries which



supply raw material, yarn and fabric to India are China, Korea, Japan, Hongkong, Taiwan, Thailand, Vietnam, Malaysia, and Pakistan and Bangladesh.

Europe’s share in the imports is about 10%. Among the European countries, important are UK, Germany, France, Italy, Belgium, Turkey, and Spain. The share of North America, South America and Other counties is about 10% of total.



5. Structure of Foreign Trade

5.1 Import Scenario

•

Apparel products are Imported in to / exported from India under the following categories: HS CODE

DESCRIPTION

61

ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CORCHETED.

62

ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED.

•

Consistent and steady growth in imports in the past 3 years.

•

Product code 62 constitutes major share of imports.

•

Import trend of product code 62 volume has been growing at a CAGR of 20%

•

The product code 61 by volume represents lesser share of imports but it has been growing at a CAGR of whopping 60.3% - unprecedented growth trend.

•

Import of product code 62 by value has been growing at a CAGR of 10% while that of product code 61 by a moderately higher 13% per year. Import Trend of Apparels into India - Volume ‘000 units. CATEGORY

2005-06

2006-07

2007-08

2008-09 (Apr-Dec)

HS CODE : 61

3659

5983

10565

15081

HS CODE : 62

5615

6762

10265

9709

Total

9274

12745

20830

24789

Total Import In To India (HS Code: 61 & 62) : By Volume (‘000 units)



CAGR: HS CODE: 61 = 60.3%,

HS CODE: 62 = 20.0%

Total Import In To India (HS Code: 61 & 62): By Value (million Euros)

CAGR: HS CODE: 61 = 13.0%,

HS CODE: 62 = 10.3%

5.2Export Scenario India’s apparel exports in 2006-07 were of the order of EURO 6.1 billion, accounting for about 46% of total textile exports from India. Indian apparel exports grew by of 11.7% per year in the past 4 years, comprising of garments of all hues made of cotton, man-made fiber, silk, wool, Jute and other textile materials. The exports from India are to more than 100 countries, with EU being the largest single market accounting for about 43% of India’s apparel exports, while USA is the single largest buyer (33%) country for Indian apparels. Middle–east constituted 8% and Rest of the World 16% of India’s exports. As per the latest figures available with the Ministry of Textiles, India exported textiles worth US$ 15.27 billion during April-December, 2008. Exports declined by about 2% in 2008-09 billion due to slump in demand from global economies like the EU and the US. Page 39 Ace Global Private Limited


The past two decades have witnessed a significant growth in India’s exports of clothing. The elimination of quotas on clothing had a positive impact on India’s exports to the countries like US, EU and Canada. The consumers in these countries were largely benefited because of increased competition and decline in prices. Regarding regional suppliers, Asian exporters as a group, have gained market share in the US and EU both from ATC abolition and with it the weakening of preferences to non-Asian suppliers. However, individual country effects have varied. Quota abolition has also allowed significant expansion of production and exports of textiles and clothing in Asia particularly more for China and much less for India.

Export to US Market •

Over the past few years, there has been a shift in US imports from Central American and South American countries towards lower-priced Asian suppliers – primarily China but also India, Indonesia, Bangladesh, Vietnam and Cambodia.

•

India’s exports growth to US during 2005- 07 has been driven primarily by cotton products. In contrast exports of MMF products increased significantly in 2005 but declined in 2006 and further more sharply in 2007. MMF product exports in particular were affected by the continuing rupee appreciation which reduced India’s competitiveness.

•

The slowdown in US imports of textile and clothing that developed from mid-2007 has contributed to decline during 2008. During 10-month period of 2008, (January –October), US imports of textile and clothing declined sharply. Monthly import trends indicate slowdown in US imports from mid-2007 primarily because of a slowdown in the US economy and consequent slow down in personal consumption expenditure. The decline has been primarily attributed to sharp decline in US retail sales of clothing and clothing accessories.

Exports to EU Market •

Overall India has been one of the successful performers among competitive Asian exporters other than China and Vietnam in increasing the market share steadily during 2004- 07.

•

Imports of textile & clothing during 2008 have shown signs of decline. During 8 months of 2008,while EU’s textile imports declined by 7.8% year –on –year basis (YOY) to Euro 36.87 billion, clothing Imports fell by 1.4%(YOY) to Euro 74.56 billion. Some countries, notably China, India and Bangladesh have managed to increase their market share because of surge in shipments of knit clothing after quotas were removed from January, 2008.

India’s Clothing Export to EU: by Value



Clothing Export of Indian to EU for 8 Months During 2008: By Value

Indian Exports to Italy India’s export to Italy is marked by fluctuating trend.

Indian Export to Italy: by Value (Euro million) HS CODE

2005-06

2006-07

2007-08

2008-09 (Apr.-Dec.)

HS CODE : 61

122.10


168.78

155.19

121.96


HS CODE : 62

143.13

145.09

111.41

83.98

TOTAL

265.23

313.87

266.60

205.94

Indian Export to Italy: by Value (million Euros)

CAGR : 0.26%



6. Competition 6.1

Characteristics

The market is characterized by: •

Branding and sub-branding

•

Offering variety: current trend and variety

•

Quality standards—in material, stitching and cuts

•

Moving up the value chain- ensuring better returns.

•

Export market: sticking to delivery schedules, conforming to quality and Quantity commitment, ability to interpret fashion changes.

•

6.2

Highly dynamic market- design changing frequently.

Product Range, Brand and Category

Category

Range

Some Brands

Formal Wear

Suits, Trousers, Shirts, Jackets

Allen Solly, Arrow, Cambridge, Colour Plus,

Blazers, Neckties…...

Louis Philippe, Peter England, Park Avenue, Reid & Taylor, San Frisco, Van Heusen

Casual Wear Kids wear

Shirts, Trousers, Jeans, Tee

Lee, Flying Machines,

Parx, Weekender,

Shirts Shorts

Wear-house, Benetton

Shirts, Shorts, Frocks, Skirts,

Lee, Ruf ‘n’ Tuf, Wear-house, Weekender

Jeans…. Ladies Wear

Skirts, Tops, Salwar Kameez , Sarees

Nike, Reebok, Vogue, Levi Strauss, Lee, Freelook, Black Berry, etc.

Market Highlights Despite substantial growth, Indian clothing market is still in the early developmental phase. Despite presence of foreign players, domestic players are not much scared of any competition from outside. The main impediment to the organized players is the presence of huge unorganized sector. In a move to compete, organized players have started their own strategy of standardizing the products Indian ‘women’s wear’ market is largely influenced by international fashion trend. International companies sell their apparels to retailers owned by international companies or retail through local franchisees.



Several fabric manufacturers have now started venturing in to garment production. Major fabric company Siyaram is a precursor to this trend in India. Madura Garments have entered the apparel market with successful brands like Van Heusen, Allen Solly, Peter England and Louis Philippe. Textile leader, Bombay Dyeing also tied up with Proline to enter the sportswear segment, as well as adding Vivaldi range to its formal menswear. The brand has been targeted towards the young group, offering a wide range of style with perfect fitting. Another strategy major textile players are adopting is ‘acquisition’. Raymond's acquired ColorpIus to jump in casual-wear, adding brands like Raymond’s, Parx and Park Avenue. Using a similar strategy, Indian Rayon acquired garments division of Madura Coats. Licensing has also been established as a major business strategy. A number of domestic Indian brands have become licensees of popular international brands such as Disney, Barbie and Powerful Girls to market both garments and other products under these brands. Traditional tailor-made garment is continually being relegated in to the background. More and more working women look for ‘ready to wear’ dresses. Attitude towards casual wear at the work place is gradually transforming. Some companies ask their employees to come to office in casual dress for some days in a week /month. The liberalization of casual wear at the work place is also driving growth in the share of women’s share in total apparel retailing. Men’s and women’s wear were traditional established market segments. Kids’ wear retailing was an offshoot of men’s and women’s apparel. The growing importance of the opinion of children has propped up demand for kids’ wear brands. With increasing affluence of lesser number of children per urban couple, urban couples now are not only spending more on their children but are also seeking quality products, including branded goods f or children as well.

6.3

Main Competitors - Market Shares

The market is vast and expanding. Only a few manufacturers have significant market presence.

Market Shares of Leading Players (%) Manufacturer

2005-06

2006-07

2007-08

Pantaloon Retail (India)

7.25

9.90

14.64

Gokaldas Exports

9.84

8.72

7.28

Arvind

2.07

5.29

5.97

Aditya Birla Nuvo

7.07

6.05

5.96

Orient Craft

7.72

6.06

5.06

Vishal Retail

2.35

3.32

4.52

Bombay Rayon Fashions

0.55

1.71

2.88



Koutons Retail India

1.82

3.51

2.79

Raymond Apparel

2.32

2.23

2.69

Celebrity Fashions

1.81

2.80

2.28

Rupa & Co.

2.98

2.56

2.14

Indus League Clothing

0.74

0.84

2.14

Pearl Global

1.72

1.53

2.08

SPL Industries (Shivalik Prints)

2.65

1.83

1.88

Lux Industries

2.06

1.44

1.65

Zodiac Clothing Co.

1.88

1.75

1.64

Madura Garments Exports

0.29

1.20

1.51

Page Industries

1.16

1.19

1.40

S E L Manufacturing Co.

1.04

1.18

1.37

Kitex Garments

1.22

1.33

1.28

S Kumar’s Nationwide

0.34

1.09

1.18

Venus Garments (India)

0.93

1.36

1.16

Kewal Kiran Clothing

0.98

1.16

1.15

Maxwell Industries

1.67

1.30

1.12

Colorplus Fashions

1.17

1.06

1.12

Loyal Textile Mills

1.47

1.08

1.05

1.13

1.02

K P R Mill

6.4

Nahar Spinning Mills

2.15

1.57

0.94

Provogue (India)

1.04

1.21

0.91

Oswal Woolen Mills

0.88

0.78

0.75

Other

30.83

23.82

18.44

Total

100

100

100

Competition by Segment

The premium and super-premium segments of the industry are gaining, following a consumer shift from economy and mid-market segments to the premium segment, while the low and economy segment is gaining from the industry becoming more organized. Year : 2007-08 Low

y r o g e t a C

44%

Economy

21%

Medium

36%

18%

Premium

14%

Super Premium

2% 3% 5%


26%

0%

10%

26%

24%

11%

20%

MENSWEAR

19%

31%

19%

30%

40%

50%

WOMENSWEAR

60%

70%

80%

UNISEX APPAREL

90%

100%


6.5

SWOT Analysis Strengths

•

Assured

raw

material

•

Weaknesses

base

–

industry.

respect to US $ and Euro

in retailing as a

larger part of manufacturing base.

value of exports as the price competitiveness of

consumption pattern

Critically

Indian exports.

private

Rising ecological & social awareness among

Changing life style has led to dramatic

Well-established

•

dependent

upon cotton. Raw cotton prices are highly

and

•

and

incomes.

production base.

fluctuating in India and

the consumers in the

shifts in the buying

Large pool of skilled and cheap work

impact

west

pattern in favor of

manufacturing industry

sourcing from India. The

force, adding to the

adversely.

western

Superior varieties of cotton fabrics are

conform

to

certain

foreign

guidelines

of

ILO

International arena.

regularly imported in to

regard

have been retailing branded products

Excellent

India for premium quality garments.

sensitive Issues such as deployment

of

Technological

labor,

unhealthy

Quota Restriction,

A paradigm shift from commodity-

obsolescence adversely

working environment of

according to FICCI

affects major part of the

labor etc when it comes

research,

based

organized

to sourcing of products.

helped

Domestic industry facing

expand its global

increasing

market further since 2005.

•

design •

trading

to

the

sector

in

may

impact

to

in

certain child

terms of productivity and in the entire value

Vertical integration & horizontal

chain.

from low cost countries is likely move towards

of

Infrastructural bottlenecks such as loss

production process

of transportation time &

leading to lowering

transaction time at ports, land borders

•

Production flexibility of

the

contributes

to

improvement productivity.

in

An expanding and lucrative market

•

•

wear’. large players

in India for years. •

competition •

Elimination

Indian

of

has India

market

is

consolidation of local players.

gradually shifting towards branded

Regional trade blocks play a significant role in

products.

adversely affecting the

the global trade with

Indian retailing industry, now at its

competitiveness

member

countries

nascent stage has

enjoying lower tariffs. Export prospects of

exploited not more than 15 to 20% of

India,

sales potential due

of

exporters.

manufacturers

•

‘ready to Several

countries

high value-added fashion garments.

of manufacturing

•

Tremendous boom

cotton and made fiber.

man-

accounts

•

result of change in

consolidation

•

Informal

Rupee fluctuations with affects the volume and

designers.

•

•

for

capability of Indian •

fragmented

sector

competitive edge of the industry in the •

Highly

Opportunities

abundant supply of

production infrastructure •

•

Threats/ Concerns

Imports

of

cheap

textiles from other Asian neighbors such as

not

being

a

China, Bangladesh etc

member of regional trade block, may be

are

adversely jeopardized.


eroding

the

•

to retail boom. •

Good prospect for more

foreign


Strengths boon

Weaknesses to

of

Opportunities investment in view

International

domestic

The US & EU governments discourage

manufacturers and

manufacturers.

imports from countries

market presence of

Increase in power tariff,

that use polluting dyes

international

them

indirect tax and interest

and

giants.

to invest and set-up

rate has contributed to

damaging

Government’s

manufacturing base.

increase in production

manufacturing

favorable

Government support

cost. India is becoming less and less

practices. This has resulted in putting

investment policy is

increasingly

competitive

with

pressure on buyers to

as a catalyst to

diversify and further

respect

Asian

limit their sourcing from

garner more direct

exports.

counterparts escalating

developing countries.

as well as foreign

Increased

global

institutional

Lack of standardization

competition in the post

investment.

and quality control of

2005

Indian garments have

under WTO.

retailers encouraging

•

competitiveness

Threats/ Concerns

•

to

to

over the years. •

•

•

environment

trade

of the increasing

foreign

expected to work

regime

resulted in large scale rejections of products in the export market.

6.6

-

Growth Prospects

Tremendous boom in retailing is expected to cause a significant change in the consumption patterns of private incomes. The growth will result in qualitative shifts in domestic buying patterns and life styles of consumers in India. Changing life style has also led to a rapid increase in the ‘ready –to-wear’ market’. Several foreign players have been retailing branded apparels in

-

India for a number of years. Indian textile industry has attracted increasing foreign investment over the years. FDI has more than quadrupled from US$ 43 billion in 2003-04 to US$ 19.5 billion in 2006-07. Inflow of foreign

-

investment has inspired other international players to start more production ventures. Growth trend of the industry has been aided and sustained by the strong services sector. The country’s performance on the macro-economic parameters has been impressive in the past 4 years. Despite temporary setback in the past few months, the economy is back on the road to recovery. The adverse impact of western financial melt-down on the domestic industry has not been acutely felt. Indian export sector, however, continues to reel under depression. Its impact is much less perceived in India than majority of e xporting countries to the west.



7. Potential for European Companies in India Apparel manufacturing activities in the European Union have been tapering off for some time due to escalating costs of labor and other key inputs, as well as hardening of currency. The situation has further intensified in the years post WTO. Dismantling of the quota regime has further sharpened global competition in the apparel industry. Many manufacturers have been forced to close down their manufacturing plants. The apparel industry in EU has witnessed major decline in production, export and employment. Some of the manufacturers have started relocating their plants to remain in business. The abolition of quota has radically transformed the center of gravity of global apparel manufacturing activities from the developed to the developing countries. India has of late emerged as a major force to reckon with.

7.1

Volumes and changes in the market for European textile clothing and Apparel

European Union has a traditional bilateral trade relationship with India for many decades. Many multinational corporations have been operating from India. EU textile and apparel companies have considerable investments in India. European apparel manufacturing companies in recent years had considerably diverted their exports from the USA to India as a matter of compulsion. Massive imports of apparel in to India from EU had started pouring in the past few years. Since the financial meltdown gripped EU in 2008, EU companies have now started looking at India for relocating their plants and using India’s developed textile infrastructure as a base for third country exports. Growth of Imports from EU European apparels have been well received in Indian market. This has been corroborated by import data available from the Ministry of Commerce, Government of India. Import of European apparels has registered an appreciable rise from 1.03 million units in 2005-06 to 2.58 million units in 2007-08 at a high CAGR of 58%. Import of European apparels has more than doubled from 10 million Euro in 2005-06 to 22 million Euro at a CAGR of 48% within a short span of 3 Years. For European apparel manufacturers, Indian market works as a savior since their own market is saddled with deep depression and products do not sell. US market does not offer any short or medium term safeguard for the same reason.

Import Scenario: Apparel Imports from EU – by Volume (‘000 units) Page 48 Ace Global Private Limited


CAGR: 58% Import Scenario: Apparel Imports from EU – by Value (million Euros)

CAGR: 48% Share of Imports •

Apparel import from EU comprises of medium and premium quality products.

•

Import accounts for about 11 to 12% by volume of total apparel imports and this percentage has remained at this level in the past 3 years.

•

Unit value realization of EU import of apparel has been on the higher side because of its superior quality. EU import constituted about 25% of total apparel imports by value in 2005-06. Its share increased further to 30% in 2007-08. The trend seems to suggest that the quality of Indian consumers is also improving and its base increasing. Page 49 Ace Global Private Limited


EU Share of Import of Apparels: By Value

Indian tastes, preferences and aptitudes are going through a process of qualitative transformation. People in the upper income strata have become increasingly fashion conscious. Like their counterparts in the developed world, rich urban households spend fabulously and dress well. This observation may be substantiated from the import data which suggests steep rise in the import trend of apparels from Italy. Import of apparels has shown a consistent rising trend from 0.22 million units in 2005-06 to 0.39 million units in 2006-07 and further to 0.49 million units in 2007-08 at a CAGR of 47%. Import trend of apparels by value has also pointed to a rising trend. Import has escalated marginally from Euro 4 million in 2005-06 to marginally high Euro 5 million in 2006-07 and then shot up to a high of Euro 8 million in 2007-08.

7.2

Main European producers present in India

Several European players belong to multinational corporations and have been operating in India as JV partners or operate in India on the basis of franchisee or licensing arrangements: Major players include: •

Benetton

•

Adidas



•

Puma

•

Zara

•

Oxford

•

Esprit

•

Dewitte

•

Marzotton

•

John Player

•

Mango

Company

Brands

Entry Strategy

Current operating Structure

History

Benetton

United Colors of Benetton, Sisley

Licensed UCB

Subsidiary

Entered in India through a licensee(Dalmia), then transitioned in 91-92 to a 50:50 JV with DCM for product distribution & franchising; formed subsidiary in 2004; Sisley launched by trent under a franchise agreement

Adidas

Adidas

JV(Majority)

Puma AG

Puma

Licensed

Subsidiary

Earlier licensing agreement with planet sports in 2002 which ended in 2005

Esprit

Esprit

Mango

Mango

Exclusive distribution, marketing & retailing rights with Madura garments Franchisee/ distribution

Product positioning European apparels are positioned in the premium and super-premium segments. The products are targeted to the affluent sections of Indian population especially towards the younger generation, for whom overall quality is the main focus. Besides, the quality of fabric, color combination, design, style, fashion, fitness and cuts are all important considerations.. Italian products are considered the most fashionable and prices charged are one of the highest.

Recent Foreign Collaborations Several Indian textile companies have formed alliances with their global counterparts, particularly those with strong front-end capabilities, in a bid to access global markets, tap technological knowhow, design skills and branding and retailing ability. The alliances have been struck in most cases by way of JVs or stake acquisition. Tie-up with overseas companies help them move up the value chain and focus on the more lucrative branding and retailing business. Leading Collaborations in Indian Apparel Industry Indian

Overseas entity

company


Profile of overseas entity

Nature of alliance


Raymond

UCO NV, Belgium

Market leader in high-end denim in JV (50:50) Europe

Arvind Mills

Gruppo Zambaiti, Italy

Amongst Italy's top 3 high fashion cotton textile companies

JV (50:50)

Lanificio

Largest

JV (50:50)

Fedora,

producer

of

carded

woolen

Italy

fabrics in the world

VF Corporation

VF Corp owns popular denim and apparel JV (40% stake of brands including

Arvind)

Lee, Wrangler, Vanity Fair, Nautica, JanSports and Kipling Welspun

Christy, UK

UK's largest towel brand

India

Acquisition

(85%

stake)

Alok

Teviz, Portugal

Manufacturer of high end shirting fabric

JV

Industries

7.3

Indian buyers / consumers of European products

Consumer Preference for European Products Earlier majority of purchase decisions were taken by the elder generation in the age-group of above 50. The elderly generation had traditional mind-set. Decisions were guided by ‘value for money’. Now demographic factors have tilted in favor of the younger generations who are empowered to take major purchase decisions. This generation spends well and dresses well. With money power supporting their choices, these classes of consumers have focus on exclusive products in terms of latest trendy fashions and go for branded products. While shopping, majority of consumers, ho wever, look for the following attributes: •

Comfort

•

Fit

•

Aesthetic Designs

•

Durability

•

Colors

•

Price

•

Quality



8. Regulatory Framework and Legislations 8.1

Sector specific Regulations

The Ministry of Textiles has taken pro-active role to rejuvenate the textile industry. It is now working more as a facilitator. Policy Initiatives • •

•

100 per cent FDI allowed through the automatic route. De-reservation of readymade garments, hosiery and knitwear from the small-scale industries (SSI) sector since end-2000. The Government is also working on ‘Advance Authorization Scheme’ and ‘Duty Exemption Pass Book’ to boost export in the textile and apparel sector.

Reform Measures •

Technology Up gradation Fund Scheme (TUFS) which was launched to facilitate the modernization and up gradation of the textiles industry in 1999 has been given further extension till 2011-12.

•

The Government of India has introduced a package of measures to help the organized sector mills to restructure and lessen their accumulated debts. The Ministry of Textiles has taken the measure to issue ‘letter of comfort’ that would enable the mills to obtain loans from banks and financial institutions. The Government has made further investment of Euro 7.8 million towards purchase of improved machinery and Euro 0.06 billion as adjustment assistance to reduce labor surplus.

•

The Government has formulated ‘Handloom Reservation Order’ to revamp the sector. The Order specifies that 11 textile products must be manufactured by the handloom industry.

•

The Cotton Corporation India (CCI) constantly monitors the price movement of raw cotton. It extends price support as and when the price falls below ‘Minimum Price Support’. The Government reimburses CCI for any losses incurred.

•

In current times of a global meltdown, the government has come out with an economic stimulus package for the textile industry. This includes (i) Additional allocation of Euro 201.6 million to clear the entire backlog in the TUF Scheme, which would enhance cash flow of the exporters. (2) Extension of interest rate subvention of 2 per cent on pre and post shipment credit (3) Additional fund of Euro 158.4 million for refund of terminal excise duty.

•

The Government also proposes ‘Integrated Textile Parts Scheme, 2005 which combines ‘Apparel Park of Export Scheme’ and the ‘Textile Centre Infrastructure Scheme’ to promote textile clusters and infrastructure facilities.



Tariff Concession •

On the import front, the Government of India has reduced tariffs on textile machinery & equipment. It has identified 287 textile machinery items which will have a basic custom duty of 5%.

Export Fiscal Incentives and Concessions India offers an attractive scheme of incentives on exports, especially through its Export Oriented Unit (EOU) Schemes. By definition, export oriented units are required to export all their production (less rejects and wastage), attaining a minimum specified level of net foreign exchange earnings from their operations. The most important provisions concerning EOUs are as follows: •

All capital goods, raw materials and consumables are allowed to be imported free of duties, and all locally procured supplies are exempt from sales tax and excise duties

•

•

Sales in the domestic market attract a lower customs duty: that is half the normal tariffs applying to imports. Profits of an export oriented unit are fully exempt from income tax until April 2010, including profits on domestic sales upto 25% of the production.

Environmental Clearances Entrepreneurs are required to obtain Statutory clearances, relating to Pollution Control and Environment as necessary, for setting up an industrial project for 31 categories of industries in terms of Notification S.O. 60(E) dated 27.1.94 as amended from time to time, issued by the Ministry of Environment and Forests under The Environment (Protection) Act 1986. Setting up industries in certain locations considered ecologically fragile (e.g. hill areas) are guided by separate guidelines issues by the Ministry of Environment and Forests.

8.2

Foreign Direct Investment (FDI) Policy

The essential provisions of foreign investment related approvals/ procedures and options for business structure are summarized below. For more details please refer the Government of India’s official website http://dipp.nic.in/. •

In most sectors/activities, foreign direct investment up to 100% is allowed through the automatic route, subject to sector rules / regulations as applicable. Page 54 Ace Global Private Limited


•

Foreign investment in any small-scale undertaking requires prior approval of the Government of India and is not automatic. Investment in any small scale enterprise (SSI unit1) by non-SSI undertakings, other SSI undertakings and even foreign investors, is restricted to 24% of the equity.

•

All foreign investments are fully repatriable for both profit as well as principal values, subject to payment of applicable Indian taxes and obtaining due clearances from the Reserve Bank of India.

•

Foreign investment is prohibited in o

Retail Trade (except Single Brand product retailing, for which 51% FDI is permitted); Lottery business;

o

Gambling and betting; and

o

Atomic Energy

o

•

All Activities/ Sectors require prior Government approval for F DI in the following circumstances: o

Where applications are from entities already having an existing previous joint

o

venture/technology transfer/royalty agreement in the same field in India; Where more than 24% foreign equity is proposed for manufacture of items reserved for the Small Scale sector.

•

Franchising Govt. of India is reviewing the policy on franchisee arrangements between Indian companies and overseas partners. Numerous international brands are present in India through the franchise route and more are also expected soon. However, the review of this policy with a view to prevent foreign retail companies entering the Indian market through franchisee route circumventing the FDI restrictions, has resulted in several ventures being put on hold or being modified, the most high profile example being that of Walmart’s entry into through a joint venture with Bharti group.

•

Foreign Technology Agreements Foreign technology agreements are allowed in all industrial sectors. The approval is automatic for agreements involving Lump sum fee not exceeding US $ 2 million, and royalties up to 5% on domestic sales and up to 10% on export sales. For agreements where no technology transfer is envisaged, payment of marketing royalties- for use of brand name/ licence- up to 1% of sales is also allowed under the automatic route.

•

Hiring of Foreign Technicians No prior approval is necessary for engaging foreign technicians / experts on short-term basis, subject to guidelines relating to duration of engagement (max 12 man-months in a calendar year) and fee rates (not exceeding US$ 1000 per day, subject to a ceiling of US$ 200,000 in a calendar year).

8.3

1

Business Structure Options

Small Scale industrial unit – defined as one where investment in plant & machinery is less than Rs. 5 million Page 55 Ace Global Private Limited


A foreign company can set up operations in India by incorporating a company under the Companies Act, 1956, through setting up a private or a public company with limited liability, which can be either Joint Ventures; or Wholly Owned Subsidiaries. A private limited structure gives the most flexibility and involves fewer statutory requirements. For registration and incorporation, an application has to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies. Foreign Companies can also set up their offices through unincorporated entities, which can undertake only the permitted business activities, namely −

Liaison Office/Representative Office acts as a channel of communication between the foreign company and the entities in India and collection of information about possible market opportunities. Liaison office can not undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India.

−

Project Office is a temporary office in India for executing specific projects. Such offices can not undertake or carry on any activity other than the activity relating to execution of the project.

−

Branch Office is allowed for trading, professional or consultancy services, research, promoting collaborations with Indian companies, representation as buying/selling agents in India etc. A branch office is not allowed to carry out manufacturing but is permitted to subcontract these to an Indian manufacturer.

−

Illustrative Business Costs Euros

Basis

Incorporation Costs

5000 - 6000

One time

Office rentals

250 to 300 per sq m

6 months advance (Interest free

per month

deposit) 3 year lease

Interiors

250 – 300 per sq m

Work spaces

300 - 400 per seat

Residential Apartment rentals

50 per sq m per month

6 months advance (Interest free

unfurnished, bare walls

deposit) 3 year lease

Industrial land

30 - 60 per sq m

Buy / 33 yr lease

Staff, junior management salary

150 - 500 per month

add 25% benefits

Middle management

1000 – 2500 per month

Performance based

Top management

3000 +/ month

Performance based

Vehicle lease (Toyota Corolla)

450 per month

15% advance 5 year lease



8.4

Practical aspects of doing Business in India

As per a World Bank study, covering 181 economies, India’s ranking has improved marginally in 2009, on various indicators of attractiveness as a business destination. However, in absolute terms the ranking remains quite low. Significantly, India is ranked a respectable 33 on the parameter of protecting the interest of the investors. Ease of…… in INDIA.

2008 Rank

Doing business Starting a business Dealing with construction permits

122 121 136

2009 Rank 120 114 131

Change in Rank

Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders

89 105 28 38 169 90

89 114 25 33 167 81

0 9 -3 -5 -2 -9

Enforcing contracts Closing a business

180 140

180 140

0 0

-2 -7 -5

However, Italian companies planning to enter Indian market need t o consider carefully the ‘need’ for a local partner. In most activities, the government regulations allow a 100% foreign ownership. Therefore a Country Manager may serve the purpose instead of having an Indian investor partner. However, if a local partner is preferred, a due diligence review must be carried out, before finalizing the tie-up. Foreign entities can build in sufficient safeguards to protect their legitimate business interests in joint ventures. Some important issues arising in management control of joint ventures are explained below: −

−

−

All verbal understandings must be formalized in writing, even for confidential agreements. Ensure a provision for right to exit from a contract and clear procedures and triggers for termination and dispute resolution All intellectual property must remain the exclusive domain of the originator and only licensed to the joint venture / local agent.

8.5

Investing in Existing India Companies

Foreign companies planning to invest in existing Indian companies can do so under the general permission of RBI under Foreign Exchange Management Act (FEMA). The companies are required to notify the concerned Regional Office of the Reserve Bank of India (RBI) within 30 days of remittances, and within 30 days of issue of shares to the foreign investors. Page 57 Ace Global Private Limited


Indian companies having foreign investment approval through FIPB route do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors.

8.6

Taxes and Tariffs Taxes & Tariffs Tax on Business Income Capital Gains Tax Dividend Tax Minimum Alternate Tax

34% 10.5% - 34% 14.4% 11.5%

Withholding Taxes (On knowhow, royalty …)

21%

Service Tax Import duty (average) ** Excise Duty Sales Tax / VAT (this is a turnover tax applying on sales, and varies state to state)

10.3% 24.42% 8% 4 - 12.5%

** For some cotton articles only basic import duty is charged at a fixed rate of 10%. In some cases, the import tariff is charged as a fixed amount per piece rather than as a %age of CIF value. For example Men’s Shirt’s, Knitted or Crocheted of silk – carries a basic duty of 10% or Rs 90 per piece, whichever is higher.

8.7

Protection of Intellectual Property (trademarks, patents, etc.)

In the past, India’s intellectual property rights regime was a cause for concern to several international investors, marked by infringements of international trademarks and patents under India’s domestic laws on these subjects. However, there is now a well-established statutory, administrative and judicial framework to safeguard intellectual property rights in India, whether they relate to patents, trademarks, copyright or industrial designs. Well-known international trademarks are protected in India even when they are not registered in India. The Indian Trademarks Law has been extended through court decisions to service marks in addition to trade marks for goods. Indian Patents Act, 1970 / 2002 / 2004 The Indian Patents Act, 1970, contains the law governing patents. The Act has been amended by the •

Patents Act, 2002 to meet with the second set of obligations (Term of Patent etc.). This amendment, which provides for 20 years term for the patent, Reversal of burden of proof etc. came into force on 20th May, 2003. The Third Amendment of the Patents Act 1970, by way of the Patents (Amendment) Ordinance 2004 came into force on 1st January, 2005 incorporating the provisions for granting product patent in all fields of Technology including chemicals, food, drugs & agrochemicals and this Ordinance is replaced by the Patents (Amendment) Act 2005 which is in force now having effect from 1-1-2005 .



Once the patent application is filed, it goes through a process of scrutiny and publication (made open for public inspection). Any person can file an opposition to grant of patent after the application has been published and within a period twelve months after the grant of a patent. If the application satisfies all the requirements of the Patent Act, the patent is granted, and published in the official gazette. Every granted patent is valid throughout India, and gives the patent holder the exclusive right to make, use, sell, offer for sale and import the product or use the process. However, the government can make use of the patent for its own purposes or for distributing an invention relating to medicine to hospitals and dispensaries. Furthermore, any person can make use of the patent for experiment or education. A patent holder may assign the whole or any part of the patent rights for the whole of India or any part thereof. A patent holder may also, by a license, permit others to make, use, or exercise, the invention which otherwise would not be allowed. Infringement of a patent is the violation of the exclusive rights of the patentee. Determination of infringement depends on the scope of exclusive rights of the patentee, whether the infringer’s acts amount to making, using, selling or distributing a product or using a method and if in fact the acts amount to an infringement. The burden of proof is on the patent owner for proving infringement. •

Trade Mark Act

Trade Marks Act, 1999 seeks to provide for the registration of trademarks relating to goods and services in India. The rights granted under the Act, are operative in the whole of India. The term of a trademark registration is for a period of ten years but may be renewed from time to time in the prescribed manner and on payment of the prescribed fee. A common ground for refusal is likelihood of confusion between the applicant's mark with registered mark or pending prior mark. •

Design Act

The essential purpose of design law is to promote and protect the design element of industrial production. The existing legislation on industrial designs in India is contained in the New Designs Act, aligned with the changed technical and commercial scenario and made to conform to international trends in design administration. The registration of a design confers on its proprietor, copyright in the design for 10 years from the date of registration, extendable for another five years. However, it must be stated here that inspite of the well established legal framework for protection of intellectual property in India, the implementation and enforcement of these provisions still need substantial improvement.

9. Marketing and Distribution Structure 9.1

Trade channels



There is a commonality of approach adopted by manufacturers / importers for marketing their wares. Large manufacturers maintain an exhaustive marketing set-up at an all India level to reach maximum geographical spread and service customer requirements through various mechanisms. Major functions of the marketing department include: •

Organizing sales promotion measures through interface with potential / existing customers

•

Production of company literature, brochures, related ad materials

•

Organizing marketing campaign – domestic & overseas market

•

Appointment of dealership net-work & servicing the requirements of distribution network.

Structure of Marketing Department The structure of marketing department varies with size and scale of operations, as well as the product range of individual companies. There is no uniform hierarchy in the marketing department. However the typical commonly used structure is as under: Brand Manager (Retail)

Sales

Business Development

Marketing

Dy. Manager

Outside Agencies

Sales Network The products are mostly sold through a variety of cannels. These include •

Sales through exclusive company owned retail outlets. One of the major players using this channel as a major route is Arvind Mills Ltd, Color Plus, (Raymond Ltd). Increasing use of retail space in various malls for showcasing products and maximizing sales.

•

Outright sales to retailers. Majority of the players are using this channel. Prominent among them are Louis Philippe, Aditya Birla Group.

•

Operating through franchisee arrangement. Foreign players without any joint venture collaboration or technology tie-up in India prefer this route. Major advantage of this system is that one need not make substantial investment for popularizing the brand. The main onus for development of the market lies with the franchisees. If the product does not sell well or there is a danger to brand reputation, the franchise agreements are terminated. This is a cost effective measure.

Distribution Network



More than 60% of products in the domestic market are sold through distribution network. Most extensively used and popular network is presented as under:

Distribution Network

Own Outlets

Stockist

Distributor

Retailer

Major strategy of the manufacturers is creation of widest distribution network for reaching out to maximum customers across the country. In view of the expanding market demand, the manufacturers are streamlining and revamping their distribution net-work across various cities, hitherto untapped.

9.2

Key trends in the Retail sector

Domestic consumption market in India is estimated to grow approximately 7 to 8% with retail accounting for 60% of the overall segment. Of this organized retail is just 5-6%, which is comparatively lower than other countries with emerging economies. In developed countries organized retailing is the established way of selling consumer products. Despite the low percentage, Indian textile industry has grown noticeably in organized retailing of textile products. The negative phase in exports may have compelled the Indian textile retailers to explore the opportunities in the domestic market substantially causing the outstanding growth in the concerned segment. These indications give a positive notion that organized retailing has arrived in the Indian market and is here to stay. It is expected to grow at 25-30 per cent annually and would triple in size from Euro 54.7 billion in 2004-05 to Euro 170.3 billion by 2010. India is on the radar of the global retailers seeking entry into the Indian retail market. The market is growing at a steady rate and accounts for around 10 percent of the country GDP. The inherent attractiveness of this segment lures retail giants and investments are likely to sky rocket with an estimate of Euro 0.31 – 0.39 billion in the next 2-3 years, and over Euro 3.13 billion by end of 2010. Indian retail market is considered to be the second largest in the world in terms of growth potential. A vast majority of India's young population favors branded garments. With the influence of electronic media, urban consumer trends have spread across the rural areas also. The shopping spree of the young Indians for clothing, favorable income demographics, increasing population of



young people joining the workforce with considerably higher disposable income, has unleashed new possibilities for retail growth even in the rural areas. Thus, 85% of the retail boom which was focused only in the metros has started to infiltrate towards smaller cities and towns. Tier-II cities are already receiving focused attention of retailers and the other smaller towns and even villages are likely to join in the coming years. This is a positive trend, and the contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%. Market Reach of Key Players Players

Brand

No. of Retail outlets

Retail outlets by city

2005-06

2006-07

2005-06

2006-07

Raymond Limited

Raymond Shop

332

380

167

174

Kouton’s Retail India Ltd.

- Kouton’s

206

500

NA

221

- Charlie outlaw Pepe

Pepe

58

NA

27

NA

Aditya Birla Navo Ltd.

Peter England

21

22

12

NA

Arvind Brands Ltd.

Lee

53

71

NA

71

Provogue India Ltd.

Provogue

75

100

24

27

Madura Garments Ltd.

Allen Solly

24

NA

16

NA

Levi Strass India Pvt. Ltd.

Levi’s

65

115

NA

29

Personality Ltd.

Weekender

50

60

NA

25

ITC Group

Wills Life Style

40

55

NA

30

Arvind Brands Ltd.

Wrangler

NA

35

NA

23

Gini & Jony Pvt. Ltd.

Jini & Jony

29

NA

15

NA

TCNS Clothing Pvt. Ltd.

W

28

26

NA

64


Van Heusen

22

25

16

NA

Span Clothing Pvt. Ltd.

Spankar

30

50

15

28


S F Jeans

15

15

12

NA

Kewal Kiran Enterprise

Killer

35

NA

25

NA

Arvind Morjni Brand Pvt. Ltd.

Tommy HilFiger

NA

9

NA

7

Celebrity Fashion Ltd.

Indian Terrain

5

7

NA

7

9.3

Trade Margins and Commercial terms



Terms of Credit Extension of credit forms a major part of trade practice. Provision of credit as a structured trade practice is extensively prevalent in the lower priced product categories – lower, economy and mid segment. Minimum

:

30 days credit

Maximum

:

45 days credit

Extending credit facility to dealership network for premium and super-premium products has not been standardized as yet. The terms of payment depend on the durable business relationship between the manufacturer and the trading partners. Trade Margins The margin keeps on changing in accordance with business swing. Margins as prevalent at each stage in the entire chain are presented as under: Domestic segment

Margin for Distributor (Between 2* - 3**%)

Import segment

Margin for Importing Companies / Foreign Companies (Between 10* - 12**%)

Margin for Dealer / Wholesaler

Margin Agent (Between 5* - 7**%)

(Between 6* - 7**%) Margin for Retailer

Margin for Retailer

(Between 12* - 25**%)

(Between 29* - 31**%) MRP

Note: * Fast moving products ** Slow moving products



10.

Opportunities for Italian companies to enter the Indian market

10.1 Positive Experiences / Perceptions about Italian Products As mentioned in the previous sections, Italy has been one of the key counties from where fashion clothing and garment products and raw materials are sourced in India. Many major companies in India have business tie-up with the Italian companies and they are involved in production and marketing of their products in India. A large number of Italian companies and brands have a presence in India and are therefore known to Indian manufacturers, retailers and users. During the primary survey conducted for the purpose of this study, the manufacturing companies, importers and retailers were asked about their experiences and perceptions about the Italian products. They were asked to rate the Italian textile clothing and garments on some key criteria, and the results are pr esented below: Experiences / Perceptions about Italian products vis a vis Indian pr oducts Parameter

Qualitative/Comparative Rating Manufacturers

Distributors / Importers

Retailers

Performance

1.95

1.50

2.33

Durability

2.42

1.83

2.17

After Sales Service

2.29

2.00

2.50

Price

2.08

2.33

2.29

Rating Index: 1 – Much better; 2 – Better; 3 – Comparable; 4 - Wo rse

10.2 Increasing trend in Imports from Italy

Raw Material and Semi-Processed Fabrics As far as the raw materials are concerned, the share of Italy in the total imports in 2007-08 has been about 2.5% of total. But it has sizeable share of more than 26% in the total imports from Europe.



Share of Italy and Europe - Imports of raw material and semi-processed fabric in 2007-08

The share of Italy in total import from Europe has actually been fluctuating. In 2006-07, it was 45%, where as in 2005-06, it was 31%. The Italian share in the natural fibres – raw, yarn and fabric has been substantial but it is actually falling over last 3 years.

The share of man-made yarn and fabric, on the other hand is increasing, but has not been able to compensate for the decrease in the market share due to natural fibres and fabric. The import of special woven fabrics, tufted textile fabrics, lace, tapestries, trimming and embroidery has been increasing from Italy.



The major competitors of Italy from Europe which are exporting yarn and semi fabric into India are Germany, UK, Spain, Belgium and France. Among the imports into India, there has been few commodities where the share of Italy among the global imports has been substantial has been tabulated below. The Asian countries, especially from East Asia and South Asia are the main competitors of Italy in these commodities. China, Korea, Japan, Thailand, Malaysia, Pakistan, and Bangladesh are notable. Imports of Fabric from Italy relative to the Largest Player HS Code

HS 5111

Commodity

Woven Fabrics of Carded Wool or Of Carded

US $ million in 2007-08 Total

Italy’s

Largest

Imports

Share

Player *

28.54

3.24

13.26

12.88

5.63

2.26

153.87

10.54

96.09

106.19

10.15

35.31

5.18

0.52

2.21

Fine Animal Hair

HS 5112

Woven Fabrics of Combed Wool/Fine Animal Hair

HS 5208

Woven Fabrics Of Cotton Counting>=85% By Wt of Cotton Weighing not more than 200 G/M2

HS 5209

Woven Fabrics of Cotton, Counting >=85% Cotton by weight, Weighing >200 GSM

HS 5211

Woven Fabrics of Cotton, Counting <85% Cotton, mixed mainly with man-made fibres weighing > 200 G/M2



HS 5212 HS 5408

Other woven fabrics of Cotton

7.93

0.89

4.31

Woven fabrics of artificial filament yarn,

5.76

0.25

2.99

21.93

0.98

8.54

13.38

0.18

10.15

36.3

1.37

10.48

20.78

0.48

14.73

including fabrics obtained from Materials of Heading No.5405 HS 5515

Other Woven fabrics of Synthetic staple fibres

HS 5801

Woven Pile Fabrics & Chenille fabrics other than fabrics of Heading No.5802 Or 5806

HS 5806

Narrow Woven Fabrics except Goods of Heading 5807 narrow fabrics consisting of Warp without weft assembled by means of an Adhesive

HS 5807

Labels badges & similar articles of textile materials in Pieces/Strips/Cut to Shape/Size not Embroidered Total

412.74

34.23

200.33

* It is China except in HS 5807, where Hongkong is the largest player Source: DGFT, India

Imports of Yarn from Italy relative to the Largest Player HS Code

5106

Commodity

Yarn of Carded Wool not put up for retail

US $ million in 2007-08 Total

Italy’s

Largest

Imports

Share

Player

2.99

1.17

sale

Indonesia: 0.60

5107

Yarn of Combed wool not put up for retail sale

2.73

0.29

China: 1.94

5108

Yarn of fine animal hair (Carded/Combed)

0.59

0.14

China: 0.38

0.75

0.14

New Zealand:

not put up for retail sale. 5109

Yarn of wool or fine animal hair, put up for retail sale

5205

Cotton yarn (other than swing thread) counting 85% of more by weight of more by

0.41 14.29

0.38

Pakistan: 8.80

5.37

0.43

Nepal: 2.28

26.72

2.55

weight of cotton not put up for retail sale 5510

Yarn (other than sewing thread) of articles staple fibres not put up for retail sale Total



Source: DGFT, India

Import of Finished Products Imports of apparel products into India from Italy have been witnessing a sustained increase over the past few years, both in absolute terms as well as in terms of share of total imports into India from European Union. Italy enjoys the numero uno position within EU, in exports to India. Import share from Italy works as a barometer that measures the quality level of consumers in the exporting country. Italy’s import as percentage share of EU’s overall imports in to India by volume has increased in the first two years but declined in 2007-08. This decline perhaps occurred due to economic meltdown which has adversely affected the production infrastructure of textile industry in general. In contrast, Italy contributed much higher share to the overall imports in to India. Its share in EU’s import veered around 37 to 38% by value in the past 3 years. The products imported show a steady growth from 3.74 million euro in 2005-06 to 4.99 million euro in 2006-07 and further to 8.10 million euro in 2007-08. The products imported during the past 10 months (April-December 2008-09) has already outperformed the preceding year. Import into India from Italy: By Value - Euro Million HS CODE

2005-06

2006-07

2007-08

2008-09 (Apr.-Dec.)

61

0.74

1.11

1.73

1.61

62

2.99

3.88

6.37

7.33

TOTAL

3.74

4.99

8.10

8.95

Note: 1 Euro = 64 Indian Rupees Import into India from Italy: By Value (million Euros)

CAGR: 33.8% Italy’s share in Import of Apparels from EU: By volume



Italy’s share in Import of Apparels from EU: By value

10.3 Demand for Italian products There is no denying the fact that Indian apparel industry has made rapid strides in recent years. However, even now the growth of the industry mostly revolves around volume. Indian garment industry is saturated with low and medium quality products. It lags far behind in terms of quality especially from the point of view of international standard. Indian fashion industry faces a huge gap especially for high fashion at affordable prices. Here European apparels in general and Italian products have a major role fill up the pent –up consumer demand.

10.4 Market opportunities


Textile Apparels & Clothing in India

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